A year ago, I was in your shoes, except I did have a paid off student loan on my credit report. I started researching about buying a house and discovered that I needed to build a history. (I do have a husband, but he insists my name also be on our mortgage, so I started working to get both of our credit reports in the best possible shape to buy a house this year)
Please, may I direct you to what I think is the best site on the Internet to help people who need credit help: http://www.creditboards.com/forums/
The people there are fabulous and will help you get your credit in a good position to buy whatever yo may need, be it home, car, whatever.
I don't know about finding financing without credit, I'm sure whatever the agents here recommend is your best option as far as buying a home RIGHT NOW, but to get your credit in shape for the future, please do visit Credit Boards.
One strategy I know they like to recommend for building credit is similar to what Dan discussed below, what you do is make a deposit somewhere, usually a credit union, and then take a secured loan against it. Using the money from the secured loan, you open a secured credit card. That gives you two tradelines on your credit report instead of one. The folks on Credit Boards can point out the best banks/credit unions to do this, and will have some other ideas for you.
For myself, since I do have a husband with fair credit, I just opted to apply for credit cards known to be issued to people with little or no credit. I started with a Walmart card ($500 limit) and a crap MasterCard ($500) (there are levels of cards, sub-prime, prime, etc). After I established a credit history with them for a few months, I got a Toys R Us card ($750). Six months after having my Walmart card, I requested (and received) a credit line increase (to $850). The crap MasterCard never does credit increases, so as soon as our mortgage closes, I'm closing down that card, because it isn't worth the annual fee anymore. (PLEASE, though, read and learn about credit before you close any tradelines, it does have a negative impact on your credit score to do so, especially if it reduces the age of your history)
After 8 months with the Walmart and MC, 2 months with the TRU, I applied for an Amazon card and was approved for around $1000. 2 months later, I requested an increase and now have a $1200 credit line with them.
I started this process in March of last year, I believe I applied for the Walmart/MC cards in April or May. 2 months ago, I applied for an airline Visa, and was approved for a $5k credit line. Mind you, I have ZERO income. (Again, my husband has income, but I haven't been employed in over 14 years)
In July of last year, I was approved on a joint auto loan with my husband for $35k. In June of this year, I was approved (joint with husband, of course) for a $275k mortgage. (I have no idea how much we *could* have qualified for, that's the amount I asked to be approved for)
My credit scores are higher than my husbands, so I'm not "riding on his laurels", I'm qualifying in my own right. According to my bank, I would qualify for the mortgage WITHOUT him on it, if I claim his income, though.
Anyway, best of luck to you, I do hope you find a lender to work with you right now. Once you know whether you can qualify now, then I would work on establishing a credit history so you won't have problems like this in the future. (I would NOT advise you undertake it until you have determined whether there is a lender out there for you right now. Applying for credit now could very well scare potential lenders off, so wait until you've decided one way or the other about buying right now before you start working on building your credit file)
I had saved some money in the bank. I took out a secured loan. You essentially borrow your own money and can not spend it while paying the bank interest. A very screwy concept indeed. However, doing that bought me credit. I say bought me credit because I had to pay interest costs to gain credit.
You can ask a lender near you about this and other options. In a few months, perhaps a year or 2 you should have good credit and get a mortgage easily.
Margaret's advice is good, but there may be another way. I frequently use a mortgage broker/banker who uses "alternative" credit references. By this, he means rental payments, utility payments etc. Since you have been late paying your utilities, that may count against you. If you really want it though, you should start calling around to mortgage broker/bankers.
There's a few cautions though. The rate may be 1%-2% higher, and you need to make sure you know what the fee structure is. At the least, they will likely have a loan origination fee (should be no more than 1%) and an underwriting fee (usually what ever your market will bear). Most have a few more minor fees, and you need to make sure what and how much they are.
One of the best things that you can do to improve your credit score is to find a GREAT mortgage broker, whom you can trust, to look over your credit with you, line by line, to see where improvements can be made. In your case, having NO credit may involve obtaining credit in some form. This is where a GREAT mortgage broker can work with you to make sure that you do the right things and avoid the many pitfalls!
If you would like a recommendation to a GREAT mortgage broker in your area, please feel free to call me any time! My cell number is (207) 975-9330.
Steven M. Dyer, CRS
Keller Williams Realty
The MidCoast Group
50 Sewall Street, 2nd Floor
Portland, ME 04102
I went back and re-read what we all said, and I think we're making essentially the same point. We're encouraging you to talk to several lenders/banks/mortgage brokers to see what they say. Also, I would suggest that, if you have not done so already, find a Realtor to work with. Realtors have contact with many different lenders and may know one who works with Buyers in situations similar to yours. And please don't get discouraged.
All the best,
Maggie Hawk, REALTOR
Watson Realty Corp.
so i guess i'm doomed to rent an apt that costs twice what a mortgage would cost me.. and yes i did all the calculations.. pmi,..insurance..taxes..etc... .. even raised the interest rate to 8 and it still worked out to way less...
Some of the people that come to us looking for a Lease Purchase house have less than perfect credit (which we then work WITH them to improve it), but a few that come to my Associate and I have No Credit. This is the reason why we partnered with Public Savings Bank to provide secured credit cards which people can use to create credit in a safe and smart way. These cards need only be for $500-$1,000 where you charge low priced items and pay them completely off every month.
If you combine that with working directly with a Mortgage Lender or Credit Repair specialist, you can get your credit score to a point where Lenders will say that you have a proven track record and therefore will consider you for traditional financing.
It used to be that you could go out and get a loan base on installment loans (like a couch, tv, refrigerator, etc which could help but won't have as much impact) or alternate trade lines like utilities, etc. Nowadays, you have to have revolving accounts to really effect your FICO score. And you should probably have 3 active trade lines set up for finance. Lenders want to see if you can be fiscally responsible with these debt trade lines. Even if you are fiscally responsible and pay cash for EVERYTHING (a la Dave Ramsey whom I very much respect) you won't be able to show that you HAD debt that you could be responsible for WITH YOUR CASH.
Educate yourself & seek out Professionals who can work with you to get you on the path to homeownership. If you'd like to speak with our Mortgage Lender/Credit Repair specialist, shoot me and email or go to our website for more information to contact her. Hope this helps you out a little more.
You've gotten some good advice from both Jim and Margaret. I would add to that the following: The lender's main concern is with your ability to pay. Credit is only one measure of that. Your long record of on-time rent payments is another. If you have a long, steady work history, and are in a field where you are likely to remain employed, that's another factor in your favor.
You don't mention whether you have any deposit to put toward the purchase. When my son bought his first home three years ago, he had just finished college and had no credit and almost no work history. However, he was still able to obtain an FHA mortgage. Today's FHA mortgages require the Buyer to put 3.5% of the purchase price down. If that won't work for you, ask your lender about Homepath financing, or other programs that require little or no money down. Another possibility might be owner financing or the Seller picking up some of your closing costs. Your real estate agent can do a search for these properties.
One more thing. You say that the monthly cost for the home would be half of what you're paying for rent. Make sure that the monthly payment amount you're quoted includes the mortgage principal (amount borrowed), the interest on that money, one 12th of the annual property taxes, and one 12th of the homeowner's insurance. The short name for this is PITI. Your lender will put this in a "good faith estimate" for you. He/she will also include in the estimated monthly payment any additional fees, such as private mortgage insurance (PMI) that are required for your particular mortgage. Then you can decide if it's right for you. Good luck.
Maggie Hawk, REALTOR
Watson Realty Corp.