When you are trying your best to attain the goal of homeownership, you are worried about numerous things. First of all, you cannot understand whether you can qualify for a mortgage product with low credit scores. Buyers with bad credit can always apply for an FHA loan. But why should you apply for this government home loan? Low closing costs, relaxed credit guidelines, and small down payments – multiple benefits are linked to the government-backed program, FHA loan.
The FHA government home loans bad credit in Texas are simply designed for a wide range of buyers including first-time borrowers. The Federal Housing Administration is a part of the Department of Housing and Urban Development. Now, the FHA insures a certain amount for the lenders so that they do not lose money. After all, the low credit borrowers have risks and are likely to default on the mortgage. Now, the FHA loans provide safety and security for those who are almost on the verge of losing the dream of homeownership.
Do you also experience the same? Are you worried whether your credit score of 579 can get you a mortgage? This article explains many things about an FHA loan for bad credit in Texas.
Qualifying for the FHA Loans
The FHA mortgage program offers homeownership to the low-income buyers. People, with credit scores as low as 500, can apply for a mortgage. Moreover, extensive credit history is not exactly a compulsory requirement. Borrowers who have filed for bankruptcy and foreclosure are also eligible for FHA loans. Several factors leave an impact on the eligibility of the mortgage program. It is important for buyers to maintain steady employment for at least 24 months before applying for the mortgage. However, federal debt or delinquency can be a deterrent.
How different is an FHA loan from a conventional loan?
FHA loans are particularly designed for borrowers who do not have a long credit history. Of course, a low credit score is typically expected. Lenders design the guidelines in a way that a major credit event, bankruptcy, and a short sale are permissible. If anyone is running low on budget, small down payments are quickly available. On the contrary, conventional loans are widely known for their strict guidelines. It is unthinkable to put down less than 20% of the loan value. Conventional mortgages ask you to buy PMI when the down payment is less than 20%. Of course, FHA loans also require mortgage insurance. You can eliminate it by putting down 10% of the loan value. In addition to the context, FHA loans allow a higher loan-to-value, unlike conventional programs.
Can you understand which financing makes a more affordable option? The FHA loan comes with a set of advantages. You can apply for the loan with a credit score of 500 (for a 10% down payment) or 580 (for a 3.5% down payment). Many buyers regard the PMI as a drawback; however, other benefits surpass this little disadvantage. So, start looking out for an FHA-approved loan!