Is it possible to buy a house in Utah with bad credit? Yes! You can buy a home in Utah, even if your credit score is bad.
If you are tired of writing monthly rent checks to your landlord but worried that bad credit could keep the rent cycles going, relax! You have come to the right page, and we have some advice.
In this post, we feature some important tips to help you buy a house even when you have bad credit. I can guarantee you that we will not tell you to save and buy a home in cash. Keep reading to discover the secrets to buying a house with bad credit.
First, it is important we seek an understanding of what mortgage lenders consider to be bad credit.
What is considered a Bad Credit?
Unfortunately, most people do not know that there is no specific minimum credit score required by any mortgage lender for a home buyer to begin the process of searching for a house to buy.
The main point is that conventional mortgage lenders are free to set their credit score requirements. In addition, the lenders of government-backed loans give the lenders some peace of mind when it comes to setting credit score requirements. However, for the government-backed loans, they have to ensure a lower credit score requirement as set by the guaranteeing agency.
If you have a credit score of below 500, chances are that you will struggle to find a mortgage, and so need to focus on the following tips to help you buy a house in Utah with bad credit.
1. Consider Home loan Options for Borrowers with Bad Credit Score
If you intend to buy a house but you cannot qualify for a conventional mortgage because of low credit, the government-backed mortgage could provide an alternative. The different government-backed options for borrowers with bad credit include:
- FHA mortgage
The Federal Housing Administration backs the FHA loan. The minimum credit score to get the FHA home mortgage is around 580. However, if you can afford a 10% down payment, you can get approved with a credit score of 500 to 579.
- VA Loans
For veterans or active-duty members of the armed forces, you qualify for the VA loan, which is backed by the Department of Veteran Affairs. You will need about 620 to be eligible for the VA loan.
- USDA Loan
The US Department of Agriculture backs the USDA loan, and most lenders require a credit score of 640 to give the loan.
2. Work on Credit Improvement
Improving your credit score will most likely require some time, but it is the most practical solution if you intend to buy a house in Utah but a bad credit score is preventing you. With a good credit score, you will have more mortgage options, while you have the power to bargain on the mortgage interest.
Here are tips to help you improve credit score:
- Ensure bills are paid on time
- Focus on keeping the credit card balances down
- Check and dispute credit report error
- Keep credit cards active
Mix up the tips we have listed to help improve credit score faster.
3. Consider Local and Federal Assistance Programs For First Time Buyers
Various assistance programs make the process of buying a home easier even if you have a poor credit score. Talk to a mortgage broker and real estate experts to find out such applicable programs within your area.
4. Be Willing to Pay Higher Interest Rates
If you are willing to pay higher interest rates, then you have chances of qualifying for a mortgage with a low credit score. However, this depends on the mortgage lender you are working with. Talk to your mortgage lenders to find out if they have this option.
5. Pay a Higher Down Payment
Lenders might be willing to extend credit to the borrowers with bad credit, so long as the borrower shows the ability to pay higher down payments. The logic here is that the lender is taking a higher risk and they believe you are less likely to default a mortgage if you have paid a high down payment.
6. Find a Flexible Mortgage Lender
With bad credit, your ability to buy a house in Utah depends on being able to find a mortgage lender that provides more flexible credit requirements. Talk to your mortgage broker for advice.
7. Save Diligently For Down Payment and Closing Costs
We have shown that a high down payment can help you to overcome the low credit barrier when it comes to buying a house in Utah. Start saving for the down payment early enough and make sure you have separate savings for the closing costs.
Buying a house with bad credit is still possible. You just need to research the available options well and consult an expert.