Mortgage Lenders Who Don't Check Credit Scores
- Hard money lenders lend based on loan-to-value ratio.
- Hard money loans are tactical, short-term loans.
- If you want a long-term loan, improve your credit score.
Is it Likely You Can Find a Mortgage Without a Credit Check? No, But it's Possible
Is it possible to qualify for a mortgage without a credit check? Yes!
Actually, the full answer is "Yes, but under unusual circumstances that do not apply to most home buyers." Here are two steps to qualify for a no-credit-check mortgage.
Step 1: Find a Hard Money Lender
First, develop a relationship with a private lender, which are also known as a hard money lender. The phrase "hard money lender" sounds vaguely menacing, but in most circumstances hard money lenders serve a valuable role in the housing market. Hard money lenders specialize in short-term, fast-closing, high-interest loans to people who need:
- A bridge loan to make a quick purchase of property
- A construction pay-off loan for a spec home builder
- A loan to acquire raw land
- A construction stand-by loan
- Financing to "flip" a fixer-upper property
Here is a key fact: Hard money loans are not alternatives to conventional, long-term mortgages offered by mortgage brokers, banks, and credit unions. Hard money loans are intended for tactical, short-term use. The maximum loan-to-value ratio comfort zone for hard money lenders ranges from 50 to 70 percent of the property's market value.
Hard money lenders are usually private investors who want to invest in short-term real estate projects as a means to earn a high rate of return on their cash. Most hard money lenders work in a limited area. This is because most hard money lenders rely on their ability to physically inspect the property before investing in it.
Find hard money lenders in your area by speaking to local mortgage brokers. Some will also place small advertisements in local newspapers.
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Step 2: Present the Deal
Contact several hard money lenders and describe your proposal. The lenders will want to know:
- The purpose of the loan
- The present market value of the property
- How much you need to borrow
- How long you need to borrow (the term)
- How much you expect to sell the property for, and why
Hard money lenders will inspect the property. The amount of detail in the inspection will vary. Some will simply drive by to make sure the property exists and get an informal impression on comparable properties in the neighborhood. Others will want to learn more about the property and you.
If you have a long-standing relationship with a hard money lender, then he or she will not run a credit check on you. Where a borrower and lender have a history of deals between them, that positive history is better data than a number in a credit report.
If you have bad credit and seek a 30-year loan, your only viable option is to work within the traditional mortgage system. This means you will need a good credit score, a two-year work history, enough cash for a down payment, and a low debt-to-income ratio. If you do not have a credit score, or have a low credit score, then concentrate on improving your credit score.
If you want to enter the business of buying and flipping fixer-uppers and REOs that are flowing into the market today, then get to know hard money lenders. In time and with a positive history, you will be able to borrow large sums with no credit check. But as we mentioned at the start of this article, this is a relatively rare circumstance for almost all consumers seeking a home loan.
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