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Home equity. No credit

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Anonymous
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Home equity. No credit

Question.
My mother wants to obtain a home equity loan. Her home is paid for and valued at $140k. She has no credit score. She is an authorized user on a cresit card that hasn't been used in years. She was approved today for a Visa credit card. She has no installment loans. One collection of $143 reporting from March 2013. What does she need to do to be able to qualify without a current credit score according to myfico?
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ShanetheMortgageMan
Super Contributor

Re: Home equity. No credit

A home equity loan is usually a mortgage that is in 2nd position on title, behind a 1st mortgage.  They can also be 1st position on title, without any other mortgages against the home.  Due to them more commonly being in 2nd position, the qualifying requirements for them are a little tougher than 1st mortgage programs, and they almost always require a credit score.

 

If she still wants to obtain a mortgage without a credit score, she'd need to look into a 1st mortgage program, most likely an FHA mortgage.  FHA mortgages do not require credit scores if someone has sufficient non-traditional credit.  Sufficient meaning 3 current forms with the last 12 months being paid on time.  Examples of non-traditional credit would be rent, utilities, cable, internet, non-payroll deducted insurance, and even putting a steady amount of money away in savings.

 

Home equity loans have very little closing costs, whereas FHA's closing costs are fairly significant.  She'd be able to save herself a lot of money if she was able to get a credit score (and ideally she'd want it to be 680+) and go for the home equity loan route.  What is the reason she wants to obtain a home equity loan?

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
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Anonymous
Not applicable

Re: Home equity. No credit

Thank you for your info.

She wants to buy a small investment property to rent to my sister.
Message 3 of 4
ShanetheMortgageMan
Super Contributor

Re: Home equity. No credit

If your sister doesn't need to move into this home soon, then I'd recommend your mom wait the 6 or so months it'll take for a credit score to generate and look into obtaining a home equity loan at that time.  If this is the only way your sister can obtain shelter and she'll be homeless, then the FHA cash out route would be the way to pursue.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
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