A Simple Guide to Landing Home Loans for Low Credit Scores in Houston, TX 1

A Simple Guide to Landing Home Loans for Low Credit Scores in Houston, TX


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As you know, a credit score is one of the deciding factors in a home loan application. Since the pandemic, things have taken a drastic turn in everyone’s life. Some of them are financially slumped with high debt or low credit scores. Due to the negative remarks on the credit report, borrowers barely find the mortgage product they desire. Thankfully, the government-backed loans are still active and helping people fulfill their goals.

Having a high credit score makes a huge difference. You do not need to pay a large amount for the loan rate. You can save thousands of dollars over the mortgage term, in this way. The home loans for low credit scores in Houston, TX are still ready to offer affordable financing options. So, the article discusses the mortgage option you should keep in mind. In addition to it, you can catch up with a vital suggestion as well.

Prepare for FHA Loans in Houston, TX

The minimum credit score required for an FHA loan is 500. For this, you need to put down 10% of the loan value. The mortgage is insured by the FHA, and this makes a perfect choice for borrowers with a higher risk. Credit guidelines for FHA loans heavily depend on the amount you put down. If you are a borrower with a high credit score, you can choose a low down payment.

Borrowers must have a credit score of 580 to get a 3.5% down payment. Besides this, they also need a credit score of 500 to get a 10% down payment. When your credit score is below 500, you are ineligible for the FHA loan. Some lenders remove private mortgage insurance when they choose the 10% down payment. However, every FHA-approved lender eliminates private mortgage insurance with a 20% down payment. 

Ways to Avoid Bad Credit before Buying a House

Let’s accept an important thing: carrying bad credit cannot put an end to your dream. The lender can bring you a mortgage but you will pay a high-interest rate. If you improve your credit, it will only bring great fortune to you. Mortgage lenders go over your payment history and review the credit report. Opening too many accounts in a short period or running a credit limit might be a red flag. You can start by changing your spending behavior and avoid the negative effects on the score.

While you are working to improve your credit scores, remember a few don’ts.

  • Don’t look around for interest rates for ages.
  • Don’t create multiple credit accounts at a time.
  • Don’t try to remove an account by closing it.

During this period, you may have to inform your lender why there is a bad credit in the report. 

Now you have a clear idea about how to proceed with the mortgage, right? Talk to your mortgage lender and see which loan product suits your profile. Go through the qualifying requirements before applying for the mortgage of your choice.

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