#loans for people with no credit
Will I Qualify for an FHA Loan If I Have No Credit History?
Lenders who offer FHA loans ultimately have the power to make their own approval decisions; however, HUD provides guidance, which is brought together in its “Mortgage Credit Analysis for Mortgage Insurance” document. In exchange for the default guarantee, HUD encourages lenders to use more lenient credit criteria, relative to conventional loans. While far from a guarantee for borrowers with sub-par credit — the average FICO credit score of approved FHA borrowers in August 2010 was 697, according to HUD — FHA loans have, historically, been open to prospective homeowners with less than perfect credit.
HUD advises FHA underwriters to evaluate a consumer’s “overall pattern of credit” use, as opposed to “just isolated” credit missteps. Generally, if an applicant experienced minor credit problems more than two years before applying for an FHA loan, HUD does not require an explanation. However, if major issues occurred, including judgments or collections, the borrower must explain the circumstances surrounding the blemishes. If the explanation “makes sense” and jibes with other information in the borrower’s credit file, HUD advises FHA-approved lenders to further assess the borrower’s application. The agency uses similar guidance for borrowers with little or no credit history.
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