FHLMC is expanding Conventional conforming homeownership opportunities to more borrowers without credit scores. Until now, at least one borrower was required to have traditional credit scores in order to be approved for a Conventional loan by Freddie Mac’s Loan Product Advisor. This loosening of the credit guidelines is effective beginning with home loan applications submitted on or after May 14, 2017, with settlement dates on or after June 26, 2017.
No borrower will be required to have a traditional credit score in order to be approved by the Loan Product Advisor. There are, however, a few requirements:
- Must be a one unit home purchase or refinance and cannot be a manufactured home.
- All borrowers must occupy the property.
- A minimum borrower downpayment of 5% is required.
- Must be a fixed rate loan below standard Conventional loan limits. Currently $424,100.
- All borrower’s must provide at least two current payment references of at least 12 month’s.
- No more than one 30 day late in the last 12 months will be allowed.
- No 60+ day late payments will be allowed.
- At least one borrower must include a housing payment history as one of their payment references. The history must be documented with copies of 12 months canceled checks or written management company verification.
- No 30+ late payments will be allowed.
- No non-medical collections, judgments, or tax liens filed within 24 month’s will be allowed.
- If no borrower has a traditional credit score, at least one borrower must complete a certified Homebuyer Education course prior to close of Escrow.
- Loan Product Advisor Accept/Eligible and underwriter approval are required.
- Other restrictions and conditions may apply.
This is a huge break for people and families who stay away from using credit or just have not had the need for traditional credit accounts before. Paying cash for your expenses is no longer a barrier to purchasing a home of your own.
I have not seen the rates yet that will be offered for this program but can assure you they will be higher than loans approved with traditional credit scores. This is due to Loan Level Price Adjustments imposed by FHLMC when purchasing loans of this nature.
I highly recommend building traditional credit profile when time allows. This can often be achieved in 30 to 90 days as explained in the Hack Your FICO report.