In 2024, the average mortgage application rejection rate in the U.S. reached 20.7%, especially affecting buyers with credit scores under 680. However, there are home loans for bad credit.
Missouri’s MHDC First-Time Homebuyer Program is here to empower low- to moderate-income buyers, including those facing credit challenges, based on their financial circumstances. If you’re dealing with bad credit, consider other strong loan options like FHA, VA, and USDA loans. Take the decisive step forward in your home buying journey today!
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Can You Get a Mortgage With Bad Credit in Missouri?
Yes, you can get a mortgage with bad credit in Missouri!
A credit score below 580 is considered a poor score. It reflects a history of high debt and missed payments. However, government-backed mortgages have lenient criteria. Missouri also offers specialized programs to help bad-credit buyers achieve homeownership.
5 Steps to Buy a House With Bad Credit in Missouri
16% of Americans have a poor credit score. If you fall into this category, here’s how you can still buy a home with bad credit in Missouri.
Step 1: Review Your Credit Score
Before you buy a house in Missouri, check your credit report for errors and negative marks that could affect your credit score. If you find mistakes on your credit report, you can dispute them directly with the credit bureau.
Step 2: Look for Mortgage Options With Bad Credit
Not all loans are available for bad credit in Missouri. However, some loan options for bad credit can help you buying a home with bad credit. Here’s a list of loans and their minimum requirements:
- Conventional Loans: The minimum credit score required for conventional loans is 620 for Fannie Mae and 660 for Freddie Mac. However, a 3% down payment is mandatory.
- FHA Loans: With FHA loans, you can buy a house with a credit score as low as 500 with a 10% down payment. If your score is 580 or above, you can put 3.5% down. However, you can only use FHA loans to purchase a primary residence.
- VA Loans: VA loans are ideal for active-duty military and their spouses in Missouri, home to 400,000 veterans. While VA loans have no strict credit score requirement, most lenders prefer a minimum score of 620.
- USDA Loans: The US Department of Agriculture offers USDA loans to encourage homeownership in rural areas like Greene County, Jefferson County, Camden County, etc. While the loans don’t have a minimum credit score, lenders prefer a score of 620 or above.
Step 3: Consider Subprime Lenders
Subprime lenders, like the Missouri Housing Development Commission, offer mortgages tailored for people with bad credit in Missouri. They evaluate factors such as your employment history, income, and ability to pay down, rather than relying solely on credit scores.
These lenders also provide flexible loan terms and accept a higher debt-to-income ratio, often 50% or more for subprime mortgages. However, DTI requirements can vary by lender and loan type, which makes it easier for you to secure financing.
Step 4: Save for a Larger Down Payment
For traditional mortgages in Missouri, the minimum down payment typically ranges from 3% to 20%. However, if you have a bad credit score, a minimum of 10% is usually required.
In the Missouri real estate market, a larger down payment can improve your chances of securing a loan. Lenders also view this as a sign of financial responsibility.
Step 5: Get Pre-Approved
For first-time home buyers in Missouri, a mortgage preapproval is important, especially for those buying a house with bad credit. It informs you about your mortgage interest rate and monthly payments and helps you manage your finances better.
How to Get Missouri Loans With Bad Credit?
It can be challenging to get a home loans for bad credit in Missouri. But it is possible if you have the right approach. Here’s what to do:
- Pay Off Existing Debt: Before you buy a house in Missouri with bad credit, you should pay back the money you already owe. Missouri lenders often consider a manageable debt-to-income ratio below 36% as a sign of financial stability.
- Budget Wisely: Factor the cost of living in Missouri into your home-buying budget. This includes utilities, insurance, property taxes, and transportation costs.
- Get a Co-Signed Mortgage: Look for a co-signer with a strong credit score to strengthen your loan application. This person will be responsible for paying back the co-signed mortgage if you default on payments.
- Explore Missouri-Specific Programs: Missouri offers programs like the Missouri Housing Development Commission Program to help buyers with bad credit. It assists low-to-moderate-income residents with lenient credit requirements if their income is 120% or less of their county’s median household income.
- Understand the Mortgage Application Process: You must be well-versed with Missouri’s mortgage requirements, including state disclosures and lender criteria. Prepare documents like income proof and credit explanations to strengthen your application with Missouri lenders.
Can I Get a Mortgage With Bad Credit?
Yes! You can get a mortgage with bad credit in Missouri. There are various options available for buyers in this situation. FHA loans need a minimum credit score of 500 with a 10% down payment, while VA loans for veterans have no strict credit score requirements.
Apart from that, lenders also assess more than just your credit score; they also consider your income, savings, and overall financial situation. So, don’t wait! Make your dream of homeownership in Missouri come true today!
