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A low credit score is something that no one wants, especially when one is about to apply for a home loan program. Low credit means lower creditworthiness, and a mortgage lender does not want to approve a loan application of a person with lower creditworthiness. So, if your credit score is low, then it could be difficult for you to realize your dream of homeownership.
However, if you opt for one of the mortgage lenders for low credit scores in Houston, you can get loan approval and buy a home. But you should ask these questions before choosing the lender –
- How much can I borrow to purchase a home?
When determining how much you can borrow, mortgage lenders may consider your income level compared with your employment status, debt, as well as your credit history. Get in touch with your lender to know how to get prequalified for a mortgage before you start shopping for your new home. It can make the whole experience more effective.
- How much money do I need to come with for a down payment?
In order to get the best rate and terms for your loan, generally, you need to pay at least 20 percent of the buying price. Though one can get qualify for a home loan with a lower down payment, it is difficult for you when your credit score is not good. Besides, with a lower down payment, there is a chance that monthly private mortgage insurance (PMI) payment will be added if your down payment is lower than 20%. Your down payment can affect other variables, such as your interest rate, terms and monthly payments. So, ask your lender for more information about the minimum down payment required for your loan with a low credit score. And if you might be eligible for any down payment or cost-saving assistance programs, decide what is right for you.
- What will be the interest rate?
It is another important question. You should ask your lender for a direct interest rate quote and the corresponding annual percentage rate (APR) for the loan. As the APR accounts for fees and other loan-related charges, it provides you with an apples-to-apples comparison among mortgage lenders. Don’t be afraid to shop around until you find one you are comfortable with.
- What is the difference between fixed-rate and adjustable-rate mortgage?
A fixed-rate mortgage keeps the same interest rate over the life of the loan, generally a 15- or 30-year term. It keeps your monthly payment for principal and interest steady, as well as predictable over time. Adjustable-rate mortgages, or ARMs, have interest rates, which change based on the market, and as a result, your payment will go up and down. Most ARMs are based on a 30-year term and generally start with an initial fixed interest rate for a specific period of time, usually 5, 7 or 10 years. It’s crucial to compare these two types of mortgages to find what’s best for your situation.
These are the general questions that you can have to a low credit score mortgage lender. Once you get the answer to these questions, you can go forward and apply for a home loan to the lender.