Can I qualify for a mortgage if Ive never had a loan of any kind?

Question

I have good credit, but have never had any major loan of any kind - car loan, student loan, anything. I'm 24yo and hope to buy a house hack in California in the next year or so. I'm hoping to put low money down through an FHA loan but am realizing that I don't have any serious credit history other than no credit debt and a high credit score (haven't even had a credit card for very long). I am pretty thrifty and don't like the idea of putting myself thousands of dollars into debt for a new shiny car not to mention taking on an additional monthly payment that I can't afford (I live in Santa Cruz and cost of living alone is ridiculous), but realize that lenders may not take me seriously when they see that I don't have any loan history already.

Will that make things harder for me when it comes to getting a mortgage/hard money loan for a house?

Thanks!

Matt

Will that make things harder for me when it comes to getting a mortgage/hard money loan for a house?

Thanks!

Matt

Parker Larsen · Answer

Hey Matt,

Fellow Santa Cruz real estate investor here. If you are going to be pursuing real estate seriously then you should start trying to build your personal and business credit ASAP. It really helps with obtaining the right lending rates and also can become an asset when used in conjunction with your business credit for future acquisitions. I highly recommend checking out a local credit union in the area and getting a small personal loan that you put on auto pay. When I was doing this I used Bay Federal Credit Union in Aptos and took out a bank account secured $500 loan with a 24 month pay period. The interest ended up being nominal, something around $35 and putting it on auto pay ensure you don't miss a payment. This step is critical...you want to show the banks you're capable of not missing payments even though the loan is a small one. PM me if you want more details on this process!

Justin Phillips · Answer

@Matt Meyers I was in your exact same shoes when I bought my first house at 21. I thought it sounded like a scam to finance something I didn't want or need, just to bring up my credit score. I just used credit cards for all eligible purchases, and paid off monthly. It may have taken a little longer, but my credit was in a good spot based off that history. It can be helpful having a couple credit cards open, as then there's more trade lines. Best of luck, and keep up the great work!

Doreen M ODonovan · Answer

If you talk to a lender now they can tell you exactly what you need to qualify. No guessing. I know someone who had a bankruptcy and her lender walked her through everything to do 6 months in advance of actually buying.  Here is my local lender. I used her in 2016.

Cardoza | Loan Officer

NMLS 389926

C: 831.227.9399

O: 831.689.8500

3060 Valencia Avenue Suite 3, Aptos, CA 95003

1900 Camden Ave Ste 101, San Jose, CA 95124

Premier Mortgage Resources, LLC

Co NMLS 1169 | Equal Housing Lender

Jennifer T. · Answer

Since you are looking to buy an owner-occupied house, it shouldn't be a big deal as long as your credit score and debt-to-income ratio are fine.

I bought my first home, a duplex, 10 years ago.  That was only a few years after the housing crash and lenders were STRICT!!!  I don't think the process was any different then if I'd bought an owner-occupied SFH.  Similar situation to yourself, except my credit was only mediocre at the time (670s-680s).  Before I bought my first home, there were a few credit cards and one car loan on my credit report.  I still live there and rent out the other side.

The house itself didn't qualify for an FHA loan because there was some work needed, so I did conventional financing instead.  I could have done a 5% down payment, but chose to put 20% down instead in order to avoid the PMI.  Not necessarily recommending that.  But that was before I knew how gung-ho into real estate I was going to become!

And that's one of the bummers about an FHA loan that I don't usually hear people talk about.  The PROPERTY has to qualify for the loan also and be in pretty good condition.  If you can swing a 5% down payment for a conventional loan, it will open up a lot more potential properties for you.

Can I qualify for a mortgage if Ive never had a loan of any kind?

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