Dave Ramsey: What if you want a mortgage but don’t have a credit card or loans?

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Editor’s note: Money expert Dave Ramsey is the CEO of Ramsey Solutions. He has authored seven bestselling books, including “The Total Money Makeover”. His radio show “The Dave Ramsey Show” is heard by more than 16 million listeners each week on 600 radio stations and multiple digital platforms. Every week he answers a question about personal finances in his Dave Says column.

Dear Dave,

I really don’t have a reported credit as I’ve never taken out a loan or owned a credit card. What if I’m ready to take out a mortgage loan and buy a home?

Jillian

Dear Jillian,

There are basically two ways to get a home loan. One of them is having credit in a lot of places and having a huge FICO score. This is a little silly when you really think about it, but it will get you a home loan almost instantly.

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If you don’t have credit, a lender will need to do something called manual underwriting. A lot of banks did that back when they were still using common sense when lending.

Fortunately, some places will still work with you that way. They take a look at your professional history to see if you have a stable job and a good income.

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You also want proof that you are paying your bills on time. This can be as simple as showing them multiple utility bills, rental certificates, and other receipts. You are basically looking for a long piece of evidence that you are meeting your financial commitments.

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Remember that buying a home with cash is always the best way to own a home. But I don’t beat people up on a mortgage as long as it’s a 15 year fixed rate bond.

It is best to save on a down payment of at least 20 percent. This way you avoid the added cost of PMI (private mortgage insurance).

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Great question Jillian!

Dave

Dave Ramsey is a seven-time best-selling national author, personal finance expert, and host of The Dave Ramsey Show, which is heard by more than 16 million listeners each week. Dave has been helping people regain control of their money, build wealth, and improve their lives since 1992. He is also the CEO of Ramsey Solutions.

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