{"id":14369,"date":"2023-05-26T19:40:48","date_gmt":"2023-05-26T23:40:48","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/how-to-get-a-mortgage-if-you-dont-traditionally-qualify\/"},"modified":"2023-05-26T19:40:50","modified_gmt":"2023-05-26T23:40:50","slug":"how-to-get-a-mortgage-if-you-dont-traditionally-qualify","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=14369","title":{"rendered":"How To Get A Mortgage If You Don’t Traditionally Qualify"},"content":{"rendered":"
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One of the downsides of being deb- free is that it makes you invisible to the banks, making it more difficult to take out a loan, and particularly a mortgage, in the future.<\/p>\n

While it is more challenging, it isn\u2019t impossible if you learn more about how mortgages are approved, and how you can still obtain a loan by working with real humans instead of just automated systems.<\/p>\n

Having No Debt Means You Are Invisible To The Banks<\/h2>\n

In 2020, when I was ready to buy my third home, I was surprised to find that I was getting rejected to take out a loan for a mortgage. Oddly, because I had paid off all $300,000 of my debts, including $72,000 of student loans and two mortgages, I wasn\u2019t qualified as a good borrower.<\/p>\n

According to traditional banks, I wasn\u2019t a good candidate for a loan even though I had close to $1 million in net worth, including currently owning a paid off home, because I became one of the 10% of Americans who are \u201ccredit invisible.\u201d<\/p>\n

As of 2010, 26 million American consumers in the United States, representing about 11% of adults were credit invisible, according to the Consumer Financial Protection Bureau\u2019s Office of Research.<\/p>\n

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An additional 19 million consumers, or 8.3% of the adult population, had credit records that were \u201cunscorable\u201d by a commercially available credit scoring model. These records were about evenly split between those with insufficient credit history (9.9 million) and those with a lack of recent history (9.6 million).<\/p>\n

I fell into the latter bucket with no recent credit history. That meant that even though I had more than 15 years of credit history, showing more than 20 accounts I had managed over my adult lifetime, because I had no current open debt accounts, my score was not bad. It was just blank.<\/p>\n

When banks looked up my name, I didn\u2019t have a FICO score attached, which was problematic since 90% of the most well-known financial institutions make their lending decisions based on this one measure.<\/p>\n

What Does Your Credit Score Measure If It\u2019s Not Your Money Management Skills?<\/h2>\n

Homebuyers often mistake credit scores are an indicator of financial health, and that isn\u2019t always the case because this number does not take into account other important factors.<\/p>\n

Credit scores do not take into account important factors like your income, job history, cash savings, property and investments. Instead, your credit score measures your current relationship.<\/p>\n

While your payment history and your length of time making payments composes half of your credit score, the other half measures your relationship with current debts including how much you owe currently, the mix of debts you have and how often you ask to open new lines of credit.<\/p>\n

I had thought that obviously since I had a history of paying off all my student loans and mortgages that I would be a no-brainer candidate for a loan. But it turned out the opposite was true.<\/p>\n

Most Large Banks Aren\u2019t Training Humans To Approve Mortgages In Detail<\/h2>\n

That\u2019s when I learned the representatives who approve mortgages at many large institutions don\u2019t really know how to evaluate a mortgage application. Many use automated programs that analyze your loan application \u2014 rather than a real human to decide (often within minutes) whether or not you should get approved for a mortgage.<\/p>\n

Because I hadn\u2019t carried any debt, and I hadn\u2019t used credit cards in more than three years, the fact that I had no current debts made it seem like I had never had any credit lines open. One customer service representative tried to explain to me that the reason the bank couldn\u2019t offer me a loan was because I didn\u2019t have enough experience.<\/p>\n

All he was looking at was the first page of my credit report that showed dashes where numbers should be in my credit score. He assumed I had never taken out any credit and that\u2019s why my score was blank.<\/p>\n

I asked him to actually review my credit history where he saw the years of paid off accounts, and he said he had never seen this before. I asked him why I wasn\u2019t qualified since I could prove I paid off two mortgages in the past in full. He couldn\u2019t answer, and that\u2019s when I learned a better approach.<\/p>\n

Ask For Manual Underwriting And For An Expert To Review Your Application<\/h2>\n

Manual underwriters perform a detailed review of your financial information to make sure you\u2019re qualified for a mortgage. Even if you\u2019re not credit invisible, you may benefit from manual underwriting if you:<\/p>\n

That means you\u2019ll have to spend a little more time gathering up your personal data and getting it organized for a real person to review. It also means that you may have to answer some more specific questions. Some factors they\u2019ll look at include:<\/p>\n