With our zero credit score in mind, I started the research yesterday to discover what our mortgage process will require. I started by calling our local credit union, which we have held membership in for over 15 years, and I was quickly informed that they will only approve mortgages for people with a 620 credit score or higher.
I hung up the phone feeling a little surprised that our long-term credit union would have no options to give us a mortgage, but I was not discouraged. My next call was to Churchill Home Mortgage.
Churchill Home Mortgage (CHM) was recommended to us by a friend who just bought a beautiful home with a zero credit score. We had also heard of CHM from radio personality and financial coach, Dave Ramsey. Before calling, I browsed the website to see what info they may have for families in the zero credit score situation. I was pleased to find an article that outlined the basic underwriting process for people in our situation. The article said that CHM will do manual underwrites for mortgages and that in the case of a zero credit score, the borrower would need to provide four “alternative credit trade lines.” Since I was not familiar with this term, I decided to call Churchill.
I spoke with a friendly loan officer (we’ll call him Leo) at CHM, who was very helpful and friendly. He informed me that alternative credit trade lines are entities, to which a person makes regular, consistent payments such as rent, utilities, insurance.
“You need at least four alternative credit trade lines to get a mortgage,” Leo told me. “When you are ready to begin the pre-approval process, you will need to provide documentation from each trade line that shows that you have made your payments regularly and on time with no late fees.”
We can do that! I thought to myself. Besides our rent, we can get documentation from our electric company, water provider, car insurance and cable/internet provider.
“My husband and I do not expect to purchase a home until about a year from now. What advice do you have for us at this point in the process?”
Leo suggested that I make sure that both Andy’s name and my name were on all four of our alternative credit trade lines as each of us needed to provide four trade lines individually. It would be okay if they were the same trade lines, but each had to show both of our names. That was a good tip. I made a mental note to check on this. Leo offered some other helpful information regarding down payments, which I will discuss in future posts.
I came away from my conversation with Leo feeling very encouraged. Getting a mortgage with a zero credit score doesn’t sound as complicated as I first thought. Now, our next hurdle is saving for our down payment.