Many American's believe that in order to purchase a house, you must have good credit. This mindset is absolutely crazy! The people who profit off of other people using credit are the ones who push credit the most. *Banks... Cough* Banks want you to borrow money so that later you can have a higher credit score and borrow more money. Why? So that, later, you can borrow money, get a higher credit score and borrow more money. You see where I am going with this? This idea is absolutely stupid. I mean, after all, a credit score is an assessment of risk. But, what if there was a different way to assess to this risk? Let's keep going...
Most people have a home mortgage through a bank and, because the overwhelming majority of people, use this "traditional" method, it is the most publicized and socially-accepted. What if I told you that there is a better way for you to acquire the money you needed without going through a bank? Or, even better! What if I told you that there is a way that you can acquire a home without any credit at all! Well, there IS! It is a process known as
Manual underwriting is exactly what it sounds like! There are two types of underwriting: automated and manual. Automated underwriting is done by a machine while manual underwriting is done by an actual person! with that being said, a manual underwriter will look at many different things in order to approve, suspend, or deny your loan request! Some of the things that will be taken into consideration are:
A reasonable down-payment
Proof of Payment history (bills, rent, etc.)
Cash in reserve
*Each underwriter may take different things into consideration so always consult a professional!*
In fact, manual underwriting is a process that is picking up traction very quickly! According a study done by staff in the Office of Research of the Consumer Financial Protection Bureau (CFPB), a conclusion was drawn that 45 million people, 1 out of every 5 American's, are credit invisible! That's a great finding a step in the right direction. Credit invisible has nothing to do with hiding credit but, is the absence of a credit score altogether. With that being said, there has to be a process in place in order to ensure that the 20% of the US population have a roof over their head. So, let's take a look at what the manual underwriting process looks like.
There are 5 main steps to the underwriting process:
Submit necessary documents to underwriters.
Get an appraisal
Title matters (title search and ALWAYS GET TITLE INSURANCE)
Underwriter decision is made
As I discussed in bullet number 3, there are necessary documents that an underwriter may require for you and may depend on your individual loan type and/or situation. Some of the documentation that you may be asked to provide may include:
House payment or rent
One year record of deposits to checking or savings with increasing balance
Utility payment records
Proof of various insurance coverage
Cell phone payments
Payments to local stores
Rental proof of goods
Proof of student loan payments
Proof of childcare payments
Proof of medical bill payments
When in question about which documentation you should bring, always consult a professional who is experienced in the underwriting process.
A type when buying a home from Dave Ramsey, "No FHAs. No sub-primes. Nothing but your good ol’ 15-year conventional mortgage. Your monthly mortgage payments on a 15-year loan should be no more than 25% of your take-home pay."
For those who have no credit score (great job), there is hope for acquiring a home. The manual underwriting process can take anywhere from 3-6 months but, typically, a decision is made within a couple of weeks! This can be much quicker than a typical automated loan.
You may be asking, is a manual underwriting process really worth it? Of course. It is nice to have real human working with you and answering questions along the way. If you are a new home-buyer, the manual underwriting process is definitely the way to go!
For any further questions and concerns, please consult a manual underwriting professional in your area! They will better know your local market conditions. You can also send an email over to firstname.lastname@example.org and we will do our best to answer your questions and/or connect you to a local professional!