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Guaranteed by the Federal Housing Administration and offered by the FHA-approved lenders, the FHA is a specially designed home loan program. If it is going to be your first home, or if you have not owned a home in the last three years, then it will be the right mortgage option for you.
Do you have a bad credit score? Not to worry! You can opt for an FHA loan 500 credit score Texas and the surrounding areas. But before you apply for the loan, you need to know a few simple things. Let’s check these –
- FHA loans have lenient qualification requirements
It is easier to qualify for an FHA loan than a traditional home loan. The guidelines of FHA loans make allowances for borrowers who might not have an existing credit history or who need to use gift money to make a down payment. Some basic requirements to apply for an FHA loan are a credit score of 500 or more than that, a debt-to-income ratio of 50% or less, a minimum 3.5% down payment, and the home should meet the minimum property requirements of the FHA and be your primary residence.
- FHA home loans require mortgage insurance
FHA mortgage insurance is mandatory for all FHA loans. Unlike the private mortgage insurance paid by conventional borrowers who put down less than 20%, FHA mortgage insurance can’t be canceled just because you gain sufficient equity. In case you make a down payment that is under 10%, FHA mortgage insurance lasts for the life of the loan. With a 10% or higher down payment, you will pay FHA mortgage insurance for 11 years.
- FHA loans can be used for different types of homes
It is one of the main advantages of this loan. FHA loans aren’t just for single-family homes. Guidelines for buying FHA-approved condos have recently broadened. Besides, you can also use this loan to buy a multifamily home or a manufactured home. No matter the type of home you want to buy, you should be your primary residence. For instance, if you use an FHA loan to buy a duplex, you need to live in one of the units. You can’t use this loan for investment properties.
- FHA loan terms can vary by lender
While the FHA sets minimum requirements, individual FHA-approved lenders may have stricter. For instance, a lender might set their minimum credit score for an FHA loan at 580 in place of 500. Lenders set their own rates, as well as terms, so as with any loan application, it is always a good idea to shop around and compare loan offers. Getting a mortgage preapproval from more than one lender will let you see the total cost of a loan, along with FHA closing costs and other fees.
Getting an FHA loan approval with a 500 credit score will not be difficult for you when come with a decent down payment and focus on other important things. SO, start looking for a lender now!