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Buying a house is not as easy as it seems. Before you start your hunt for a house, you need to secure a mortgage from a lender. With mortgage rates rising rapidly, it can be challenging for homebuyers to get a home loan, especially when they have a low credit score. But there is no point in thinking that you have to stop dreaming of your own house.
Are you wondering what to do? Well, buying a house with 580 credit score in Houston, will be possible for you when you take some steps to improve your odds of getting a mortgage. Though there is no easy and quick way to change your income or the length of your credit history, there are a number of things that you can do before applying for a mortgage program. All these help you to get a home loan even if your credit score is as low as 580. Here we have put together a few of them-
- Know exactly what you need
When home buyers apply for a mortgage loan, most lenders want a standard package of materials from them. Most of the times, it includes a month of recent pay stubs from any buyers who will be listed on the loan and the most recent two years’ of tax filings of the buyer. Along with these documents, you may also need to submit at least three months of bank account statements along with the documents that explain any unusual large deposits or withdrawals.
- Know how much you can spend
Most mortgage lenders prefer to follow a rule that is known as 28/36 rule. That means your monthly payments on your mortgage should not be more than of your gross income. And your total revolving debt payments, including your potential mortgage, car loans, and any other monthly installment payments that you make should not be more than 36% of your gross income. It is not a hard and fast rule. Mortgage lenders can be more or less strict than that. However, it is a fairly dependable guideline for figuring out your borrowing limits.
- Avoid making any big purchases
Even after you receive approval for a home loan from a mortgage lender, he or she will monitor your finances through the closing. It means that until the lender writes the check, everything that you do will matter a lot. One of the finest ways to incapacitate your loan is to take on more debt before your home loan becomes final. Even if you plan to finance furniture for your new home, you should not do so until you own the home. And you should not buy a car or something like that while waiting for a loan to close.
These are some of the things that you should do when opting for a home loan program with a 580 credit score. Focusing on these will help you to get the approval easily and once, you get the approval, you can go to the next stage that is buying your home.