How to Get a Mortgage with No Credit Score Part 4: Use a Local Credit Union & Manual Underwriting

You see, back in the day (like before our country was credit crazy), banks had to use manual underwriting to give people loans or mortgages. This basically meant that they would review the person's financial health based on their income, their bill payment history, and how much money they actually have. Over the years, this has warped into using the credit score as an "easy" way to assess a person's financial situation. Unfortunately, this is a flawed system. Dave Ramsey has proven many times that people's dogs and dead relatives can open a new credit card account. All one has to do is get a credit card, put $300 on it, pay it off and they have a credit score. Do this a few times and you can get a loan. Pay that for a little while and they will give you a mortgage. This does not really prove that one will or can pay their mortgage. This is how our country got into the financial mortgage crisis that blew in 2008. And sadly, most of the financial world still weighs the credit score too heavily in underwriting. So back to our story...

We had finally discovered where we could get a mortgage with no credit score. We went to our local credit union, ENT, and met with an  mortgage specialist who actually had some decision-making ability. She was willing to hear our story, work through the fact that we had no credit score, and give us a chance. After the application process, she submitted the information to her underwriting team and bank manager.

They were willing to give us the mortgage if we could prove:

1) We had a good down payment (at least 20%)
2) We pay our bills (12 month payment history)
3) We have a steady income (at least 2-3 years at the same job)

Here is a list of things we needed to submit to the bank. Long, but not complicated.

• Most recent 30 Days Pay Stubs
• Statements needed to build a non-traditional credit report.  We need to prove 12 months of payments made on time as agreed.  Tradelines can be any of the following:

·         Rent payments

·         Utility bills

·         Renter’s insurance

·         Auto insurance

·         Cell phone service

·         Cable service

·         Medical bills

·         School tuition

·         Loans taken out privately from friends or family members.

• Last Two Year’s W-2s
• Most recent 1 month’s Bank Statement
• Most recent Investment Statements IE: 401K, IRA’s, Stocks, Bonds, etc 

So, the process began. We submitted all of our financial information to the bank. They contacted James' work and made sure he had a job. They contacted our prior landlord (yes, in Germany), our utility company (yes, in Germany), and reviewed our financial situation.  After only 2 weeks, which included many translated calls to Germany (not a normal situation for this process) we got approved for a mortgage up to $300,000! We even got a great interest rate (better than if we had a bad credit score)!

So, how do you get a mortgage without a credit score? Work with a small, local financial institution where you can sit down with a real person and do manual underwriting. The main reason this works versus other avenues is that the small local banks have control over the financial decisions they make. The area bank manager was involved in deciding on our mortgage and they realized the value in giving us a mortgage. They were willing to do a little bit more work and had the flexibility to make their own decisions. Most of the big banks and mortgage companies do not have this freedom.