Dear Dave,

I really don’t have any established credit because I’ve never taken out a loan or had a credit card.

What will happen when I’m ready to get a mortgage loan and buy a home?

— Jillian

Dear Jillian,

There are basically two ways to be in a position to get a home loan. One is to have credit at lots of places and a huge FICO score. This is kind of dumb when you really think about it, but it will get you a home loan almost instantly.

When you have no credit, a lender has to do what’s called a manual underwriting. It’s something lots of banks did back in the day, when they actually used common sense when it came to making loans.

Fortunately, a few places will still work with you in this manner.

They take a look at your work history to see if you have a stable job and a good income. They want proof you pay your bills on time, too. This can be as simple as showing them several utility bills, rent statements, and other receipts.

They’re basically looking for a long history of proof that you honor your financial commitments.

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

Do your very best to save up for a down payment of at least 20%, too. That way, you’ll avoid the added expense of PMI (private mortgage insurance).

Great question, Jillian!

— Dave

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