Do you intend to buy a house in Utah but you have a poor credit score? While it is easy to get rid of a couple of blemishes on your credit report, the dream of buying a house is one you should never give up on. For first time homebuyers with a bad credit score, how long it will take to buy a house in Utah is one of the questions to seek answers on. Well, the time it will take to purchase a home if you have a poor credit score depends on the strategies you put in place.
In this post, I present some important tips to help shorten the amount of time it takes to purchase a home even when you have a poor credit score.
1. Consider the Mortgage Options For Borrowers With Low Credit Score
For the borrowers with a low credit score, the dream of owning a home remains a valid one! This is through the mortgage options for borrowers with a low credit score. The federal government has put in place multiple loan options for the borrowers who end up with a low credit score. Thus, if you cannot qualify for a conventional mortgage, you may approach your mortgage lender and negotiate for either of the following mortgage options:
- The FHA Home Loan:
The FHA home loan was established under the National Housing Act, with the aim of stimulating the housing market. This is through enabling citizens who cannot afford a huge down payment and have a lower credit score. As of 2020, new homebuyers qualify for up to 96.5% of the property value, under the FHA home loan so long as the credit score is at least 580. Thus, if you cannot qualify for a conventional home loan since your credit score is below 620, you may try the FHA home loan.
- The VA Home Loan
For the veterans, active-duty military, and the National Guard members, the VA home loan is a viable mortgage option. The VA home loan sets no minimum credit score requirement, enabling the qualifying first-time homebuyers to apply for the mortgage.
- The USDA Home Loan
The United States Department of Agriculture designed this product for homebuyers who cannot afford a traditional home mortgage. However, the USDA will only provide the mortgage to the borrowers looking to purchase a home outside the already crowded metropolitan areas. Some mortgage lenders will go as low as 580 for USDA home loans.
Have applied for a conventional home mortgage but you got a negative response because of your current credit score? Choose either of the above options to fast track your journey of homeownership.
2. Be Willing To Accept A High-Interest Rate
Waiting for your credit score to improve may mean that you will not be able to purchase a home anytime soon. If you do not want to wait for a longer period, you may have to contend with the requirement of paying higher interest rates compared to the amount charged for a conventional home loan. In some instances, those with a poor credit score will pay double the rates that a consumer with a high credit score pays. To cater to the difference in credit score, you may have to settle for a less expensive property.
3. Make a Huge Mortgage Down payment
Another option for mortgage borrowers with a poor credit score is paying a huge mortgage down payment. Talk to your mortgage lender and let them know that you are willing to deposit a huge amount in the form of down payment. The mortgage lender will calculate the minimum down payment amount based on your credit score. While this may be a viable option, you may have to pay a high-interest rate on the mortgage. Choosing to pay a huge down payment along with a high-interest rate is a common approach for the mortgage lenders with a poor credit score.
4. Work on your Credit Score
If neither of the above options seems to work for you, it is time you consider working on your credit score. Getting out of the blacklist requires strict financial discipline. In that regard, you need to work on a plan of repaying outstanding debts. Upon clearing the debts, you can then start rebuilding your credit score to the acceptable limits.
A poor credit score can be a huge setback when it comes to buying a house in Utah. However, with the assistance of a reputable loan officer, you can quickly find a mortgage option that can help you purchase a home sooner. Options like the FHA home loan. VA home loan and the USDA home loan have helped borrowers with a poor credit score attain the dream of homeownership within a short period. Talk to a mortgage lender today!