Posts

USDA Home Loan in Utah

6 Techniques to Buy a House with Bad Credit (#4 is our Favorite!)

For a vast majority of people, buying a house without taking applying for a mortgage is nearly impossible. Raising hundreds of thousands of dollars to finance a home is a privilege reserved for a few.

As it stands, to qualify for a home buying mortgage, you need a good credit score. This requirement has cut off many people from achieving their homeownership dreams. However, the good news is that having a bad credit score is not a condemnation that you will never own a home.

In this post, we share some insights to help Americans buy a house with bad credit. Thus, if you have forever longed to buy a house in Utah but felt the bad credit is keeping you from attaining the dream, we have some nice ideas to help you achieve the dream.

1. Get Your Credit Score Report

The first thing when it comes to buying a house is checking the credit score. You can download a credit score report online for free or ask your banker to help you get the credit score report. Alternatively, the credit card companies can help you get the current credit score. Thus, it is a good idea you check the current credit score so that you can know the way forward.

2. Check for Erroneous Entries

Now that you have the credit score report, scan through for errors on the report. Remember that the credit score represents the calculation of credit data in your credit report. Thus, the credit report has the historical data of how you handled credit repayments. A wrong entry on the credit report results in a bad credit score. In our analysis of the credit score report, you want to see if some bad entries could be ones affecting your credit score. Any errors should be disputed with the credit bureaus immediately.

3. Consider Paying Higher Interest Rates

You  can still qualify for a home buying mortgage with a lower credit score if you are willing to pay a higher interest rate. Mortgage lenders will charge high-interest rates to borrowers with a low credit score. The high-interest rate is to cushion the mortgage lenders in case of late repayments or missed mortgage repayments altogether.

Thus, if you choose to pay a high-interest rate, bear in mind that it means you have to pay a high mortgage repayment altogether. in that regard, you need a plan to cushion you during the period of mortgage repayments.

4. Apply For Government Insured Mortgage

A mortgage-backed by the government will have lenient credit score requirements compared to the conventional home mortgage. Thus, the government-backed mortgages help thousands of people looking to buying a house but have a poor credit score. The government-backed mortgages are also less risky for mortgage lenders.

Here are some good alternatives when it comes to government-backed mortgages for borrowers with poor credit.

  • The FHA home Mortgage

An FHA home mortgage is a loan that is backed by the Federal Housing Administration. The FHA home loan is available to first-time borrowers who have not purchased a home in the past three years. The FHA home loan requires a minimum credit score of 580. For borrowers who can raise up to 10% mortgage down payment, the credit score goes to as low as 500.

  • The VA Loan

Veterans or active-duty members of the armed forces qualify for the VA loan, which is backed by the Department of Veteran Affairs. There is no specific credit score to qualify for the VA loan, but the borrower has to meet all other requirements.

5. Raise a Higher Down Payment

Mortgage lenders may be willing to take a chance on a borrower who has offered to pay a high down payment. Ideally, the logic of paying a high down payment is similar to agreeing to pay a high-interest rate. The mortgage lenders believe that a borrower with a low credit score is less likely to default if they have invested a huge amount as the down payment.

6. Work on Credit Score Improvement

While you can still buy a house in Utah even if you have bad credit, clearing your name is still the best approach. Unfortunately, clearing your name does not happen quickly, and will require some financial discipline. To start improving your credit score, consider paying all the bills on time. In addition, be sure to pay down as much of your credit card debt as possible.

Conclusion

I hope that you now have a good understanding of how buying a house with bad credit works. While getting a mortgage is easier, a bad credit score will complicate the process. Talk to your mortgage lenders for the best options that will enable you to buy a house in Utah even though you have a bad credit score.

Mortgage Lenders

7 Hacks to Buy a House with Bad Credit (#5 is a MUST-READ!)

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.