How to Buy a House in Utah With a Bad Credit Score?
Barely anyone wants to keep writing rent checks each month. Buying a house is the secret to breaking out of that rent cycle. A common misconception a lot of people have is that they can’t afford to pay a mortgage, which is why they choose to rent. That’s actually not true at all, there are so many options out there! There are plenty of options for low-income earners or those with a less than an ideal credit score – Which is what we’ll go over in this post, so keep reading!
1. Check Out Home Buying Programs For Borrowers with Low Credit Scores:
Borrowers who want to buy a house in Utah but have a poor credit score experience tough times finding mortgage lenders who are ready to accept their applications.
Fortunately, we have home buying programs that favor borrowers with bad credit. Here are some of the options available to home buyers with a bad credit score who are interested in buying a house in Utah.
– The FHA Loan: An option that is perfect for first-time homebuyers. The FHA home buying program is available to applicants with a minimum credit score of 580 and only requires a down payment of 3.5%.
– The VA loan: is available to veterans or surviving spouses of a veteran only. Offers benefits such as low-down payments, lower interest rates, and flexibility when it comes to a lower credit score.
– The USDA Rural Housing Loan: Although a majority of lenders will require a 640 FICO score, some will go as low as 580, making this an option for borrowers with a low credit score. This loan applies to rural areas, not big cities. Check with a loan officer to see if the home you are looking to buy can qualify for a USDA loan.
If you have been denied a conventional mortgage due to poor credit score, check for mortgage lenders authorized to lend the FHA, VA or USDA home mortgage loan types. Those home buying programs simplify the experience for those looking to purchase a property but have a poor credit score.
2. PMI & Higher Interest Rates:
Some Mortgage lenders will have to offer borrowers with a low or bad credit score higher rates as a way of protecting themselves from defaulted payments. Or if you’re not already familiar with Private Mortgage Insurance, that’s something that might have to be added onto your monthly mortgage payment. Please note that you can refinance later on down the road to get that removed and it doesn’t have to be endured forever.
3. Raise a Large Down Payment:
A large down payment is another poor credit compensating factor. Talk to your mortgage lender to find if they can consider a larger down payment as compensation to your low credit score. Some mortgage lenders may consider this option but charge you a high-interest rate, as an extra protection measure. Two things may happen when you offer a higher down payment:
– It shows the mortgage lender you are willing to take on more risk on the home loan, thus they may take the risk to lend to you.
– The lender finds a reason to believe you will pay the mortgage in full since you have invested more of your own money from the beginning.
4. Clear up Credit Score Errors:
Check your credit report for any errors. You may have a lower credit score by mistake. Request for a full record showing what led to the low credit rating. Be willing to make those phone calls and see if you can negotiate to clear up your record. It’s worth it to do everything you can to help raise your credit score.
5. Boost Your Credit Score:
If neither of the above options works, boosting your credit score could be your only alternative. In that regard, check your credit score online and come up with strategies to boost the current score. There are more than enough programs out there you can follow to help you do so.
Consider repaying all the outstanding debts, and try not to get any more loans till you can minimize what’s already on your plate. Over time, your credit score will begin to rise. You can also speak to one of our loan officers to see what is the most important items to take care of first to boost your score more quickly. This alternative requires some patience, and it is not automatic, but in the meantime, you could kill two birds with one stone and start saving for a down payment as well. Six months could make a big difference, it doesn’t have to be years and years of saving!
6. Save Diligently and Pay for the Property in Cash
Open a savings account and start putting money aside that you can use to buy a house in Utah. Note that you need to ensure a disciplined saving pattern in order to achieve the dream of buying a house in Utah. Most people will not go this route & need to be in a home sooner rather than later, but it is still an option, and worth giving it a mention.
7. Cash Out Some Assets To Buy a House in Utah
You know that set of four-wheelers you got 2 summers ago that you never ride? Or that grill you only ever use once or twice when the in-laws come over? You could sell them! There’s probably a lot of things you don’t use daily that you could make some serious cash on. This could be a quick way to raise cash to use to put toward a down payment.
Hopefully, this post has helped instill a sense of hope for your journey to becoming a homeowner in St. George, Utah. I know it can be tough to get your ducks all in a row but there are so many great opportunities and options out there available to see you get into your forever home. For any of your financing questions, you may have, feel free to reach out to any of our friendly & knowledgeable Loan Officers here at Sun American Mortgage. They would be happy to give you some solutions & options to get you into your forever home.
