Low or No Credit Mortgages
- Adam Garrett
- Aug 17, 2024
- 14 min read
Updated: Jul 29
No or Low Credit Loans:
NACA: Credit Score Not Considered, Below Market Rates in Some Cases, No Down Payment, No Closing Costs, But w Restrictions & a Long Process
While you'll see with this program that it typically takes 3-6 months to go through the qualification process, the numbers, in the end, are good if you're able to use it for a purchase. This program offers a loan with no down payment, no closing costs, and below-market rates. The below market rates are available for both of the following:
A. Households equal to or below median income households for the MSA (not adjusted for household size)
B. Households above median income for the MSA, but purchasing in a census tract that is below the median income for their MSA.
You'll still need to have money for things like a home inspector & for prepaid expenses. Credit score is not considered, but there are some minimum credit element qualifications. Buy-down options are also good with this program. If you have above median income, you may not get the below-market rates, but the rates will still likely be lower than you can get in a number of places.
Caveat:
If you look at the reviews of NACA, the reviews are mixed, in part because of the hoops that need to be jumped through, the fact that it's a non-profit, and the fact that the qualification process can sometimes lead to you thinking you're prequalified but then being refused the loan after getting under contract due to something that wasn't checked prior to you receiving qualification. Some sellers/listing agents may be wary of this fact as well so it may hurt the strength of your offer.
Restrictions include but are not limited to:
You'll need to actively contribute to NACA via volunteering every year, but this task can be accomplished as easily as some social media shares.
You & those in your household can't own another home at the time of purchase (closing).
You will need to be an owner-occupant & can't move out of your home and keep a NACA mortgage; if you wish to leave your home, you'll need to refinance to another product or sell the home.
You'll need to work with a NACA qualified buyer's agent (I am one) and a NACA certified home inspector.
"The purchase price plus any repair escrow funds (i.e. for repairs to be completed after closing) cannot exceed the approved Maximum Mortgage Amount. The current limits for 2023 are $548,250 for a single-family home in most areas and up to $822,275 in high cost areas. There is a considerably higher limit for multi-family properties." (FAQs)
USDA Direct Loans (Rural Areas)
Per USDA Direct: (see "Verify")
"Regardless of their score, an applicant with an outstanding judgment obtained by the United States in a Federal court, other than the United States Tax Court, is not eligible. This requirement is statutory and cannot be waived... however, if there is a payment agreement in place, and it is in the Agency’s best interest, an Administrator Exception may be requested."
"If the applicant’s credit score is below 640, or there is one or no credit score, Rural Development will determine if there are any indicators of unacceptable credit. The Indicators of Unacceptable Credit include:
• Little or no credit history. The lack of credit history on the credit report may be mitigated if the applicant can document a willingness to pay recurring debts through other acceptable means such as third-party verifications or canceled checks. Third party verifications from relatives of household members are not permissible.
• Payments on any installment account, on a per account basis, not cumulative of any and all of these account types, where the amount of the delinquency exceeded one installment for more than 30 days within the last 12 months.
• Payments on any revolving account, on a per account basis, not cumulative of any and all of these account types, which was delinquent for more than 30 days on two or more occasions within the last 12 months.
• A foreclosure that has been completed within the last 36 months
• An outstanding Internal Revenue Service (IRS) tax lien or any other outstanding tax liens with no satisfactory arrangement for payment
• Two or more rent or mortgage payments paid 30 or more days late within the last 2 years. If the applicant has experienced no other credit problems in the past 2 years, only 1 year of rent history will be evaluated.
• Outstanding collection accounts with irregular payments or no satisfactory arrangements for repayment, or collection accounts that were paid in full within the last 6 months, unless the applicant had been making regular payments previously
• Non-Agency debts written off within the last 36 months, unless the debt was paid in full at least 12 months ago
• Agency debt that was debt settled within the past 36 months or is being considered for debt settlement, and lastly
• Delinquency on a federal debt"
"Whose Credit is Reviewed?
• FOR ALL STATES:
All note signers (applicant, co-applicant and co-signer if present)
• FOR COMMUNITY PROPERTY STATES ONLY (VA isn't one of them):
Non-purchasing spouse (NPS)
• NPS’s obligations are considered in the applicant’s Total Debt
• The applicant’s NPS must provide a copy of the credit report
• NPS’s credit history is never considered a reason to deny a loan
• Judgements must be paid in full unless an exception is granted by the Loan Approval Official"
Per Investopedia, "The nine states in the United States that have community property laws are:
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin"
No Credit Loans:
Churchill Mortgage: Traditional No Credit Loans
Churchill Mortgage is not a non-profit like NACA. It's a traditional mortgage lender, but they have more options with no credit than most traditional lenders. If you have bad credit, these folks might not be your best bet, with NACA likely being a better bet despite the hassle, but if you have no credit at all, & are looking for a more expeditious process than NACA with less restrictions imposed, these folks should be one of your first calls. Unlike NACA, above-median income buyers are not penalized in interest rates if they want to purchase in above-median income census tracts.
These no-score loans vary in type but include:
Conventional
USDA
VA
FHA
no construction to perms available w/ no credit score
no rehab loans available w/ no credit score
According to a rep I spoke with, rates are around half a percent higher for those with no credit score vs those with a great credit score, but the margin can be more narrow for those with a large down payment (i.e. 20%).
Keep in mind that while it may not take as much time as a NACA qualification process, it will typically take longer than a traditional prequalification. It will require manual underwriting.
While you'll need to share some of your information to get their guide on no credit mortgages, here it is.
Guild Mortgage: Traditional No Credit Loans
"Provides a complete picture of our customer’s financing situation for better pricing
Reviews income and debt through a bank statement analysis process
Financing options utilizing FHA, VA and USDA loans are available with down payments from zero to 3.5%
Primary purchase transactions only
Non-traditional credit must be established with rent history, utilities or car insurance payments to qualify"
Novus Home Mortgage: Traditional & Foreigner No Credit Loans
Novus Home Mortgage has options for the following:
"ITIN & Foreign National Loans"
"Work Visa, Student Visas, EAD Card, DACA to 80% LTV - no credit required."
"FHA/VA (NO SCORE) Still get max financing. (Must have non-traditional tradelines reporting for at least 12 months, at least one has to be housing related.)"
HSBC: No US Credit Loans for Foreigners
"Whether you’re buying a home in the U.S. to live in or use as an investment property, HSBC has the experience to provide mortgage solutions for foreign nationals.
• International borrowers with qualifying documentation do not need U.S. credit history to apply for an HSBC mortgage. We may order an international credit report for your application.
• Loans up to 75% of appraised property value or purchase price, whichever is lower
• Fixed and adjustable-rate mortgage (ARM) options
Family-assisted financing available
Borrowers with $10k-$74,999.99 in personal deposit & investment balances, if they qualify, can have access to up to $3 million
For borrowers with combined personal deposit and investment balances from $75,000+, who otherwise qualify, there's access to up to $5 million
For borrowers with an HSBC Private Banking relationship, there's up to $10 million in financing available
Chase: No US Credit Loans for Foreigners
Like HSBC, a Chase Bank International move mortgage is a viable option if you are looking to purchase in the US without any US credit. Non-traditional credit or a foreign credit report may be used. 20% down is typically required, but sometimes 10.01% down is acceptable with significant compensating factors.
Per Chase's International Move page, "Traditionally, loan approval criteria require a credit score in order for you to be eligible for mortgage financing. The international relocation program does allow loan approvals without having U.S. credit. As a substitute we need to obtain a foreign credit report with translation if applicable. In situations where a foreign credit report isn't available, we will be required to create a non-traditional credit history. To do this, we will need documentation that supports a minimum of a 12-month payment history on four separate accounts. We will need 12 months of canceled checks or bank statements confirming timely payment has been made. Documentation to support your current credit history for the past 12 months of housing payment, credit card and insurance along with one other account will be needed to create the report."
ICBC: No US Credit Loans for Foreigners
While they have options for those with a US credit score as well, for those without one, they ICBC offers the following for mortgages in the US:
Qualified Financial Asset- ICBC-Flex ARM Plus consumer Terms Non-FNMA Loan Residential Loan Program
Income Verification - ICBC-Flex ARM consumer Terms Non-FNMA Loan Residential Loan Program
It's also possible to qualify via 2 years of credit history with your home country (particularly if not exclusively China).
Low Credit Loans:
5 Confirmed Sub 580 Credit Score Lenders
Novus Home Mortgage: 500+ Credit Score VA Loans & FHA 10% Down Loans
"FHA and VA down to a 500 Credit Score (Must meet satisfactory credit guidelines which are defined in the chart below. This means we are allowed no thirty-day late payments in the last 12 months for housing and installment but allowed 2 thirty-day lates in the last 2 years for housing and installment. We are allowed a max of 2 sixty-day late payments for revolving in the last 12 months. 30-day lates don’t matter for revolving. Lates over 1 year old for revolving don’t matter. Medical Lates don’t matter. Lates on charged off/Collection accounts do matter.) FHA Score 500-579 Require 10% Down Payment. 580+ Score Require 3.5% Down Payment. VA 100% Financing "
Lender Contact Info
Alonzo Edwards <aedwards@novushomemortgage.com>
Senior Loan Officer — NMLS #41294
(601) 940-1631 direct
He provided me with all of the above information.
Carrington Mortgage: 500+ Credit Score VA Loans, ARM loans, & FHA 10% Down Loans
Guild Mortgage: 540+ Credit Score
Guild Mortgage offers scores as low as 540 presumably for VA loans and FHA 10% down loans.
Sebonic Financial: 550+ FHA Loans
As you can see on their website, they offer FHA products with credit scores as low as 550
Freedom Mortgage: 550+ VA & FHA Loans
Typically 550+ score is required for VA & FHA with Freedom Mortgage
580+ Scores
Mike Hartnett w Prime Lending: Many Loan Programs, i.e. 16 Varieties of Renovation Loans
Mike Hartnett Branch Manager
Offers some programs that others don't, including 16 varieties of renovation loans including for jumbo loans & manufactured homes. He has options starting at a 580 credit score last I checked.
Phone: (757) 344-3366
Email: mhartnett@primelending.com
He is an affiliate lender.
Lori Marrow - mortgage broker with many programs
Lori Marrow Mortgage Broker She offers some programs that others don't. At times she has offered 0% down VA construction loans and 3.5% down FHA construction loans, & a 2.75% interest VA mortgage for someone with a <620 credit score for instance. Last I checked, some of her options started as low as 580 score.
Phone: 757-870-0231
Email: lorimarrow@live.com
NMLS: 174955
Address: 742 Thimble Shoals Blvd
Newport News, VA 23606
More Lenders
Here are additional lenders per the Mortgage Reports, though keep in mind that the top lender by interest rate, DHI, may prioritize DHI-built properties:
Lender | Avg. 30-year rate | Minimum score | Customer rating |
5.58% | 580 | 5.0 | |
Cornerstone Home Lending | 6.29% | 580 | 5.0 |
Academy Mortgage | 6.31% | 580 | 4.9 |
loanDepot | 6.31% | 580 | 4.5 |
Cardinal Financial | 6.38% | 580 | 4.8 |
Paramount Residential | 6.44% | 580 | 4.9 |
Guaranteed Rate | 6.51% | 580 | 4.8 |
PrimeLending | 6.52% | 580 | 4.6 |
Rocket Mortgage | 6.55% | 580 | 4.5 |
Citizens Bank | 6.57% | 580 | 4.7 |
580+ USDA Loans
620+ Conventional Loans
With limited exceptions (i.e. NACA listed above) you'll typically be penalized more with a conventional loan than with others for low credit with significantly higher interest rates (and significantly higher PMI if putting <20% down), here are some options with a 620 minimum score:
Carrington Mortgage has typical conventional & jumbo loans with 620 credit scores.
620+ FHA/VA/USDA & 640+ Conventional Loans w/ Good Rates & Lower PMI
Here our local state products via Virginia Housing-approved lenders provide an option that's not as lucrative as NACA, but without as many hoops to jump through for a product where the rate and the PMI (conventional loans) or MIP (FHA loans) won't hit you as hard as most other loans. There are some income limits, but especially if bypassing some of the grant program subsidies they offer (i.e. down payment assistance & closing cost assistance grants that can sometimes stack with other grants from unrelated programs) the loans themselves typically have higher income limits than most forms of down payment assistance. Also, if you're buying a house in a federally targeted area, the requirements are even more lenient.
Post Bankruptcy, Foreclosure, Short Sale Lenders (Including Day After)
Supreme Lending: Day After Discharge of bankruptcy, foreclosure, short sale
Beyond Program:
"• Minimum 600 credit score.
• Borrowers can qualify the day AFTER discharging a Bankruptcy, Foreclosure, or Short Sale!
• No seasoning required on Assets like Checking/Savings accounts, 401(k) accounts, stocks, and mutual
funds, etc.
• Self-employed borrower with less than 1 year income eligible
*Ineligible states: AK, some parts of FL and NY"
Contact Information for Lender Who Provided Information Licensed in VA, MD, DC, GA, FL.
Alvin Montilla
Producing Branch Manager
NMLS #1836176
Direct: 703.291.6828
Cell: 703.332.5176
AlvinMontilla.SupremeLending.com
Alvin.Montilla@SupremeLending.com
8000 Towers Crescent Drive, 13th Floor Office 1369 | Vienna, VA
22182
NACA - no waiting period for chapter 13 after discharge
Chapter 7 - 24 Months After Discharge
"I filed Chapter 7 bankruptcy, am I still eligible for the purchase program?
Those Members who have filed Chapter 7 will not be eligible until 24 months after discharge. During that 24 months, Members must establish on-time payments on all accounts. After 24 months Members are eligible for NACA Qualification as long as they adhere to all other NACA Qualification requirements."
Chapter 13 - No Waiting Period
"I filed Chapter 13 bankruptcy, am I still eligible for the NACA program?
Yes. Those Members who have filed Chapter 13 are eligible for NACA Qualification after discharge without a waiting period as long as they adhere to all other NACA Qualification requirements. Additionally, if Chapter 13 is dismissed, any liabilities within the last 24 months must be addressed with a proof of zero balance or an approved payment plan with on-time payment for twelve months."
Source: NACA
Additional Information:
Typical Impact of Low Credit on Mortgage Payments & Total Interest Paid on Conventional Loan (As Much as 25% Higher Interest Rates):
While rates vary over time substantially, here's the typical cost difference based on credit differences in July 2024 for a 30-year conventional loan for $400k per Bankrate, though keep in mind that conventional payments will vary more based on credit than government-backed rates (i.e. VA, FHA, USDA) & that with options like NACA, there is no difference in payment based on credit score as long as you qualify. Keep in mind as well that the below isn't factoring in certain non-traditional non-conforming higher interest loan options, & not considering hard money loans that can be even higher rates:
*As of July 2024Source: myFICO loan savings calculator | |||
FICO score | APR* | Monthly payment | Total interest paid |
760-850 | 6.254% | $2,464 | $487,007 |
700-759 | 6.476% | $2,522 | $507,906 |
680-699 | 6.653% | $2,569 | $524,715 |
660-679 | 6.867% | $2,626 | $545,208 |
640-659 | 7.297% | $2,741 | $586,929 |
620-639 | 7.843% | $2,891 | $640,903 |
Importance of Checking Foreclosure Rates of Institutions
Those seeking a mortgage who have low credit should pay especially careful attention to foreclosure rates with any institution that they consider just in case the worst happens. A foreclosure can have a negative impact on credit & like late payments, a foreclosure will have a negative impact for typically 7 years. For instance, the nonprofit NACA has "an extremely low foreclosure rate of 0.00012183 (i.e., about one-hundredth of one percent)". Most if not all other institutions listed will tend to have higher rates of foreclosure.
Importance of Budgeting
Those who are unwilling to establish a budget and stick to it (even if they modify it over time as they should) aren't well-prepared for renting or owning. If you have low credit, especially, your chances of success with a mortgage are much better if you're willing to establish good budgeting habits before a purchase.
Assistance to Boost Your Credit
Steven Carpel (Lender)- reimbursement for credit repair
Steven Carpel
Mortgage Banker
Offers some programs that others don't, including a reimbursement of the first 4 months of paid credit repair with 1 company at closing.
Phone: 757-921-1387
Email: StevenCarpel@gmail.com
Related:
About the Author: Adam Garrett - 3rd Generation REALTOR®
Adam is the 3rd generation in a line of award-winning real estate agents serving SE VA. He has served full time at Garrett Realty Partners since May 2014 when he joined the marketing department before transitioning to full-time sales to assist buyers and sellers in February 2015. He believes that an educated buyer or seller makes the best decisions, & is dedicated to helping with that both digitally & on-site physically for buyers & sellers. He's also available for referrals to real estate agents around the globe. In several capacities, his resources & direct offerings for assisting sellers & assisting buyers are either unmatched or are top 1% for the SE VA area, and in some cases, nationwide. Not stopping after closing, he also provides information for tenants, landlords, & homeowners.
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While Adam can refer buyers and sellers elsewhere, Adam’s direct coverage includes most of SE VA including Hampton Roads (VA Peninsula, Southside, & Middle Peninsula), the Northern Neck, & Greater Richmond.
Adam's Coverage Map with Adam's 5 Multiple Listing Services highlighted in orange & areas without good MLS coverage excluded:
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