Finding your dream home and contacting the lender will never land you a mortgage. There are many things that decide your fate as a borrower. How are your finances? Do you have zero late payments? A savvy consumer usually has a fair good credit score, or he or she knows how to boost credit scores when necessary. Qualifying for a home loan requires you to pass particular eligibility requirements. 2020 has been a difficult year for borrowers and lenders; however, the mortgage rates are going up.
As things are looking up in 2021, you can start applying for a home loan with your low scores. The FICO score holds huge importance over mortgage applications. Lenders opt for a hard credit check so that they can inform the buyers regarding the interest rate. Apart from the mortgage rates, the credit scores also play a role in choosing the loan rate. For example, you cannot apply for a conventional loan if you have a 580 credit score. However, you can apply for an FHA loan with the same score. The government-backed loans are capable of allowing buyers with low credit scores.
So, the article discusses the essential information about home loans for low credit scores in Houston, TX. If you remember these things, you can make an informed decision before purchasing a mortgage.
The Federal Housing Administration insures the FHA loans. In this way, the loans become less risky for loan officers. In addition to it, the borrowers have an easy time passing the eligibility guidelines. You can manage a small (3.5%) down payment and apply for refinances up to 97.75% of the property value. The FHA loans bring more advantages to the borrowers who need to pay a high amount on housing. In case you have had bankruptcy or foreclosure in the past, the mortgage program is not an issue.
You need at least a 580 credit score to qualify for a 3.5% down payment. Private lenders originate the FHA loans, and the credit score eligibility requirements vary as per the lenders. However, every lender obtains three credit scores and chooses the average number.
The Department of Veterans Affairs insures your VA loan. In addition to it, the lender does not lose money in case you default on the loan. You are eligible for the VA loans if you are a veteran of the National Guard or Military Reserves. Eligible spouses can also apply for a mortgage. Currently, this is the most helpful loan program in the market.
You might have to pay the funding fee for once, but VA loans are not a one-time thing. The funding fee changes on the basis of down payment you get. In this context, your service also impacts the VA funding fee. Similar to FHA loans, the VA lenders also have a varying credit score requirement. You can still find approved lenders allowing 550 credit scores.
So, have you found the appropriate mortgage option for you? Start the research and work on your credit scores!