title:�You Have No Credit�Have A Job & Want To Buy A Home�

author:Dale Rogers
source_url:http://www.articlecity.com/articles/business_and_finance/article_6981.sh
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date_saved:2007-08-23 17:04:55
category:business_and_finance
article:
Many working people in the U.S. have no established credit, but want to own their
own home. They never held a credit card or bought a car with installment payments.
There is no credit score with any bureau. Its almost like they are leaving ZERO
financial footprints as they traverse through life. Almost certainly, large
deposits need to be paid to secure basic services such as water, electric, phone,
etc. This particular segment of the home buying public is a throw back to the way
business was conducted a 100+ years ago. Other than Sears and Roebuck and small
home savings banks a credit report with scores didnt exist. The credit grantor
would size you up see if you were a good bet. You needed a job and would need to
demonstrate some community stability coupled with a good down payment then an
arrangement could be made for you to buy. The small savings and loan companies
granted mortgages based on savings deposits of your community of neighbors. There
wasnt any secondary market to sell the newly originated loan. I recall having to
postpone a home sale in the late 1960s because they were waiting for a payoff on a
house that had sold. When that sale closed, the buyers were able to go ahead and
fund their new loan by the freed up money. Credit crunches were prevalent before
the secondary market came into play.

As mortgage financial markets have evolved they primarily were geared to a cookie
cutter segment of the market that had established credit. Politically, banks and
lenders were buttoned holed and urged to work toward establishing mortgage programs
for people who had no established credit, but had a job and some how met their
financial obligations every month. Their rent, insurance, groceries, phone, water,
sewer, car repairs, gasoline, doctor and dentist bills were paid every month. As an
added incentive community investment credits were offered which would be beneficial
in the eyes of bank and lending regulators as lenders pointing to those
institutions who were helping this community home buying segment and could then
make a case for their Federal and/or State charter renewals. It turns out to be a
strong incentive to offer community based lending to working people who want to buy
a home and have no recorded credit.

So how might this work for a working person with no credit and who wants to buy a
home. First, there would be an effort to determine their current housing history.
If they have been renting and paying said rent in cash an effort would be made to
document the pay history of the rent by way of a Verification Of Rent, called a VOR
in the lending trade. The most weight is given to one with a professional manager
in place such as an apartment community or Realtor managed property. Verification
Of Rent directly from a private individual where cash is exchanged is a bit more of
a challenge. However, falsifying a document (VOR) in order to get rid of a bad
tenant carries heavy penalties for the landlord. Other types of bill paying would
be verified and is called Alternative Credit verifications. Letters from utility
companies indicating on time payments of electric, phone, cell, water and such
could form a further basis for building an Alternative Credit file. Sometimes
potential buyers of a home live with relatives and have no rental history. This
too, can be addressed. The other aspect of these community based lending programs
is the verification of a job or business or other means of income. This can be done
with pay stubs, business bank statements (if available but not required for the
self-employed) or what ever means available to verify the existence of some type of
employment income. State or city occupational licenses are sometimes used.
Verification Of Employment is another way to show periods of employment and income
whether it is W-2 or Miscellaneous 1099 income. The whole point of this collection
of information is to try and build an Alternative Credit file, which can be
utilized to make a lending decision. Just like in the old days, these files are
hand underwritten with a human being pouring over all the documents. It is truly
common sense lending. Many of these loans require some type of investment on part
of the borrower. It could be as little as ZERO, $100, 2.25% or higher down
payments. Some borrowers do not have any bank accounts and operate on strictly cash
basis. Check cashing services with free money orders is their bank. Lenders call
cash on hand as mattress money. Lenders can handle this scenario as well. Sellers
can pay all or most of the closing costs for buyer/borrowers per lenders.

With all of this gathered, Neighborhood Lending Programs, FHA (although some
automatic underwriting now-but hand underwriting available), VA, do not require
credit scores. Utilizing Alternative Credit a borrower with a job and NO CREDIT can
buy a home with a little work. Even those known as undocumented workers can buy.
If there are collections a credit repair program will be required to payoff those
collections.

Dale Rogers

<a href="http://www.brokencredit.com" target=new>http://www.brokencredit.com</a>

About The Author
Dale Rogers is a thirty-year mortgage veteran and frequent contributor to the
Broken Credit Blog The BCB is a free website created to assist the general public
with information about credit repair and responsible mortgage lending.

<a href="http://www.BrokenCredit.com" target=new>www.BrokenCredit.com</a>

This article was posted on August 24, 2006
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