Q&A

Q:

I have been shopping for a home and, after I finally found the one I want, I was told by my bank that I don't have enough credit to get a mortgage loan. I explained to them that I have a great job and that I have saved up a decent down payment, but I have always paid for what I needed with cash. I was told years ago by my parents that I should never get into debt, but I guess that's not true anymore. Is there any way around this?

A:

The short answer is "yes," but there is more to this question than just the credit issue.

This first thing that I would like to address is more for the benefit of any other hopeful home buyers out there who may be reading this.

Before you spend a great deal of time looking for a house to buy, you must check with a trustworthy local lender to make sure that you can get a loan to purchase the home you will eventually find. Getting a negative answer after you have already found a house you love will be disturbing at best.

Check the financing first. It can avoid a lot of unnecessary heartache later.

Second is the credit issue. While conventional (bank) loans will almost always require an established credit history as well as a pre-determined credit score requirement, this is not true of loans obtained through the Federal Housing Administration (FHA).

While a bad credit history will almost always cause you problems until you deal with it, if you are in a situation where you have no credit whatsoever, FHA will accept what are called "alternative credit references". These can consist of anything that has been paid in a timely manner for at least 12 months. It could be a utility bill, cable bill, phone bill, or even a monthly or quarterly payment for car insurance. FHA's requirement is that you provide a minimum of two of these bills.

In addition to this, in a "no-credit" situation, FHA will also require that you provide a timely housing payment history for a minimum of 12 months also.

So if you have not established any good (or bad) credit, then don't believe someone when they tell you that you are not in the game; you are. Just contact one of our many excellent FHA lenders here in Michigan City for assistance.