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 Wisconsin with bad credit.
Ohio 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 Wisconsin
16% of Americans have a poor credit score. If you fall into this category, here’s how you can still buy your dream home:
Step 1: Review Your Credit Score
Before you buy a house in Wisconsin, 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 well-suited for active-duty military members and their spouses in Wisconsin, which is home to about 300,000 veterans. Although VA loans do not have a strict credit score requirement, most lenders favor a minimum score of 620.
- USDA Loans: The US Department of Agriculture offers USDA loans to encourage homeownership in rural areas like Portage County, Sauk County, Marathon 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, the Wisconsin Housing and Economic Development Authority, offer mortgages tailored for people with bad credit in Wisconsin. 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, 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 Wisconsin 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 Wisconsin, a mortgage preapproval 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 Wisconsin Loans With Bad Credit?
It can be challenging to get home loans for bad credit in Wisconsin. 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 Wisconsin with bad credit, you should pay back the money you already owe. Wisconsin 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 Wisconsin 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 Wisconsin-Specific Programs: Wisconsin offers the WHEDA Mortgage Loan Program through the Wisconsin Housing and Economic Development Authority to assist buyers with poor credit. It supports the state’s low-to-moderate-income residents.
- Understand the Mortgage Application Process: Familiarize yourself with Wisconsin’s mortgage requirements, including disclosures and lender criteria. Prepare documents like income proof and credit explanations to strengthen your application.
Can I Get a Mortgage With Bad Credit in Wisconsin?
Yes! You can get a mortgage with bad credit in Wisconsin. There are various loan options available for buyers in this situation. FHA loans need a minimum credit score of 580, while VA and USDA loans don’t have strict 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 Wisconsin come true today!
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