The perfect way to purchase a house indeed is to pay in cash. But this creates severe trouble for many people. Especially, for those who do not have solid savings or good credit scores. When your credit score is dangling below 500, you need to find an ideal loan option. Yes, just when you were anxious about making a down payment, the FHA loans save you right away. The Federal Housing Administration provides a mortgage program for cheap closing costs, low down payment requirements, and flexible credit guidelines.
The program, FHA loan 500 credit score Texas, fulfills many borrowers’ dreams, and it is a more convenient choice than conventional mortgages. Now, you need to remember that the Federal Housing Administration does not originate the loan. The authority only insures the lenders because they are at a risk. The risk is related to a borrower’s credit scores and financial situation. For this very reason, the FHA insures just in case the buyer defaults on the loan.
It is quite well-known that FHA loans have earned popularity for flexibility. The mortgage program caters to any borrower with low or average credit scores. So, let’s keep a few things in mind before submitting your mortgage application.
Who is perfect for FHA loans?
The loan program serves the purpose for several borrowers, but it is most suited for first-time homebuyers. Are you looking forward to purchasing a primary residence? Then this mortgage can be a huge help. The minimum down payment requirement is 3.5%, and this makes homeownership very much attainable. First-time borrowers reap great advantages from the loan because they lack equity from the earlier house sale. Of course, the loan program is not only for first-time borrowers, but it has gained much popularity among them. The lenient requirements help in the purchase process, and they can easily qualify.
The FHA loan program was initially launched to encourage homeownership. It is not available for borrowers looking for their second homes. That’s why a buyer who is willing to move to his/her primary residence can apply for FHA loans.
Credit score requirements
A prospective homebuyer must have more than 620 credit scores for favorable terms. But the FHA loans make a perfect choice for those who face a crucial financial challenge. You can manage a great deal if your credit score is more than 580. This is the only way to secure a 3.5% down payment. When the credit score goes down and is around 500, you can still purchase a house. There is no other home loan like the FHA program that caters to 500. If it is possible, you can get a cosigner. This reduces the loan risk to a great extent.
The process of FHA loans is similar to conventional loans. Now, remember to go through other loan requirements before submitting the loan application. Work with an experienced lender who has previously gone through the FHA process. As this loan program makes home-buying possible for millions of Americans, you should start working for it!