Did you know that you could still buy a house in Utah with a low credit score? While credit score is lenders core consideration whether to lend you or not, having a low or bad credit score does not mean that, you will not own your first or second home. In this post, we share important insights guiding you on how to buy a house with bad credit.
1. Home Loan Programs for Borrowers with Low or Bad Credit Score
The federal government has multiple loan options, meant to help Americans afford homeownership. For the borrowers with a bad credit score, there are different home buying programs to consider. Here is an overview into each of the options:
- The FHA loan for Bad Credit
When you have a low credit score, Federal Housing Administration offers you a chance to redeem your dream of homeownership. The FHA home loans come with a lower standard compared to the conventional home loans. This is because the Federal Government is committed to removing obstacles to homeownership. Therefore, with a credit score below 580, you qualify for a FHA home loan, so long as you can afford a down payment of above 10%.
- VA Loans For Borrowers with Low Credit Score
If you are a former member of the military or you are an active member or a surviving spouse, you qualify for the VA home loan. Started by the Federal Department of Veteran Affairs, the VA home loan is meant to help qualifying members afford homeownership. Therefore, it is a fantastic starting for first time buyers. Apart from being a friendlier option for borrowers with low or bad credit score, the VA home loan offers a decent interest rate.
- USDA Home Loan
The United States Department of Agriculture offers affordable home loans. The objective is to encourage homeownership within the qualifying rural areas. The USDA home loan is a zero down payment mortgage option, hence an affordable option for first time homebuyers.
Therefore, if your bad ort low credit score are keeping you from owning a home in Utah, consider the options we have just highlighted. Here are other tips for borrowers with a poor or low credit score.
2. Check and Correct your Credit Score
Are you planning to buy a house in Utah? The initial step should be checking your current credit score. if you have a poor credit score, you will want to understand why. Check the credit report to determine what would have gone wrong. Apply to have any mistakes on credit report rectified, so that your credit score is good.
3. Choose to Pay a High Interest Rate
You still qualify for home mortgage with a lower credit score, but this could mean paying a higher interests rate. The mortgage lenders raise the interest rate with an intention of recovering their money soon. Thus, if you are willing to pay a high interest rate, the better chances of qualifying for a mortgage with the low credit score.
4. Higher Down Payment
Mortgage lenders will take chances if a borrower with a poor credit score is willing to pay a high down payment. The simple logic is that a large down payment shows the lender that you are willing to take on more risk on your home loan. In addition, the mortgage lender believes that you are less likely to run without paying the remainder. Lastly, it is a show of commitment that you are ready to buy a house in Utah. therefore, if you can come up with a 20% or more on your home purchase, you increase the odds of earning a mortgage approval.
5. Focus on Rebuilding your Credit Score
If your credit score is as bad, you may not qualify for home loans. Therefore, the only option left is work on your credit score. The road to rebuilding your credit score can be a tough one, but with commitments, you can achieve the objective. Here are some options to consider when it comes to improving your credit score.
- Focus on repaying outstanding debts
- Setup repayments reminder to ensure you do not miss the deadlines
- Pay more than once in a billing cycle
- Contact your creditors and setup a repayments structure
- Apply for new credit sparingly
- Consider debt consolidation plan
The points we have highlighted will help you improve the credit score.
6. Buy in cash
Finally, if your credit score is poor and lenders have shown you the door, the only option is to buy the house in cash. While only a few are privileged to afford the cash-buying price, you can save for years and still achieve the dream of owning a house in Utah. Come-up with a savings plan and fast track it to achieve the objective faster.
Buying a home with a poor credit score may not be a simple process. Talk to a knowledgeable mortgage broker for professional assistance.