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Loan pre-approval question

I am a first time home buyer looking to get pre-approval for a home loan. I recently got my first credit card for the sole purpose of building of credit. This line of credit shows on my report but I do not have a score yet. My understanding is that lenders will then look at alternative credit. Unfortunately I don't really have any bills coming to me in my name. Car insurance and cell phone both go through my parents. I pay them rent so having them sign a letter stating that is really going to be the only alternative credit I'll have going for me. Despite all of this I have a decent amount of savings. As of right now I have 20k in savings. I'm bringing in at minimum $2200 monthly after taxes. I talked with mortgage broker earlier today and her response was essentially to call in a couple of months when I've got a credit score. Is this the same answer I will get from everyone or should I call around to a couple more places? Waiting a couple of months wouldn't be the end of the world, but I'd like to get some sort of pre-approval sooner rather than later so I can get the ball rolling and at least start going out to look at homes. I'm looking at homes in the 80k range. Does my savings help me out at all in this situation? I was originally hoping it would offset my lack of credit some. Any advice is greatly appreciated.
  • June 04 2010 - Avondale
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Answers (4)

Without at least 4 trade lines you would have a very difficult time obtaining financing.  The advice you received is good advice get some additional credit established and continue to add to your savings until you have the necessary score's and credit history.  Your other option is to locate a property that has owner financing and maybe the lack of credit will not be a concern with the seller.
  • June 04 2010
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Hi -

Seller financing could be a really good option for you.  The seller might ask for a credit report, but you would write them a letter explaining your situation.  It would help also to have a couple of letters of recommendation and/or people the seller could call to check into your character and reliability.  After all, you are asking them to loan you a large sum of money, and they want to know you will pay them regularly.  Having a 25% downpayment is a huge help, and would give the sellers a good-sized chunk of the money they are looking for, and then regular monthly payments for the agreed-upon time.  That could help them tax-wise as well. 

Good luck with your home search and purchase!

Kirsten
  • June 16 2010
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In todays mortgage world, it would be hard to obtain a mortgage without some sort of credit. Can your parents switch the insurance an cell phone over into your name without it costing much more? There are a lot of things which could be done to help, like the down payment which you have saved up, if you have stable employment, if your debt to income is low etc. It should not take long before you have a credit score. Make sure that you are never late on your card, and it also may be a good idea to obtain another secured card with a credit union, they seem to have the lowest rate.
  • October 27 2010
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Considering the fact that your original post was dated back in June, you surely have at least 1 credit score by now.  Certainly not all lenders work the same way or have the same policies and guidelines.  But my experience has been that you can receive a loan approval with as little as 1 tradeline on your credit report and as little as 1 score on your credit report, as long as that score is at least a 640.  The key is that the lender must run your loan file through an automated underwriting system and let the system, not an underwriter, determine the overall scorecard rating.  Of course without all of the facts it is impossible to make an accurate determination at this time, but from the sounds of things, your loan may very well be quite doable.

My advice would be to seek out a lender and you may very well be in for a very pleasant surprise!  Good luck!
  • November 04 2010
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