Just because you don’t have student loans, credit card bills, because disbursement, and other conventional business lines tracked by credit bureaus doesn’t necessarily mean you can’t be eligible for a credit loan.
Most of the time, borrowers seeking a mortgage do not have sufficient conventional credit history to give a lender a sound credit score. This is never a big deal!
The good news is that FHA loan qualifications accept unconventional credit in situations where you have unsuitable business lines with Equifax, Trans Union, and Experian.
How does it work?
Unconventional credit references
FHA requires that, as a borrower, you have three credit references from two groups of unconventional credit sources.
Group One: This first group of references has a higher weight than the last group; it is considered to be a more accurate predictor of your credit worth.
The first group includes payments for utilities such as electricity, water, and gas. Rent payments, cable TV bills, and phone bills can also be included in the first group.
Group Two: FHA qualifications are feasible by incorporating payment references such as childcare payment, insurance payments, internet phones, and a 12-month bank statement showing deposit history, illustrating higher balance. The latter group also allows for individual loans where the settlement terms are documented and signed by both interested parties.
Apply for FHA Financing
To be eligible for FHA financing, you must show that you are employed, in good standing, and trustworthy. When applying you have to give the following:
1. You must submit your previous addresses within two years. If you are a couple who had multiple addresses, you need to enter both directions.
2. You must be able to show your employment history within two years, which includes your employer’s name and addresses along with your gross monthly income.
3. Submit your income tax return and W2 for the last two years.
4. If you are a veteran, you will need to include your discharge papers as proof of your veteran status.
The ideal way to qualify for the FHA financing program is to show that you have owned a dependent loan within two years.
To do so, you must pay off your old debts, pay on time, avoid any major credit builds like buying a new car, and stay with one employer. Keep in mind that being eligible for FHA financing is much simpler than dealing with a private lender, but it’s not free. Must demonstrate stable employment, reliability, and general ability to pay on time.