In 2024, the US mortgage application rejection rate increased to 20.7%. The biggest reason? Bad credit scores! 16% of Americans have a poor credit score. If you fall into this category, don’t worry. There are still ways to buy a house in Nevada with bad credit.
Nevada offers various government-backed mortgages with lower down payments and flexible credit requirements. Apart from that, there are also state-specific loan options to ease your home-buying process. There’s no reason to wait, start your search now!
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5 Steps to Buy a House With Bad Credit in Nevada
Step 1: Review Your Credit Score
Before you buy a house in Nevada, 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
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 Nevada, home to 205,615 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 Ely, Gardnerville, the Dayton towns. While these 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 Nevada Rural Housing Authority, offer mortgages tailored for people with bad credit in Nevada. 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 Nevada, 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 Nevada 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 Nevada, a mortgage pre-approval is important, especially for those with bad credit scores. It informs you about your mortgage interest rate and monthly payments, and helps you manage your finances better.
How to Get Nevada Loans With Bad Credit?
It can be challenging to get home loans for bad credit in Nevada. But it’s possible if you have the right approach! Here’s what to do:
- Pay Off Existing Debt: Before you buy a house in Nevada with bad credit, you should pay back the money you already owe. Nevada lenders often consider a debt-to-income ratio below 36% as a sign of financial stability.
- Budget Wisely: Factor the cost of living in Nevada 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 Nevada-Specific Programs: Nevada offers programs like the Nevada Rural Housing Authority program to help buyers with bad credit. They assist low-to-moderate-income residents with lenient credit requirements if their income is 120% or less than their county’s median household income.
- Understand the Mortgage Application Process: You must be well-versed with Nevada’s mortgage requirements, including state disclosures and lender criteria. Prepare documents like income proof and credit explanations to strengthen your application with Nevada lenders.
Can I Get a Mortgage With Bad Credit?
Yes! You can get a mortgage with bad credit in Nevada. 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 Nevada come true today!
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