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If you already know that your credit score is on shaky ground and you are starting to think about buying your first home, then you may be nervous by thinking about your chances. It is because a low credit score either lowers your possibility to get a home loan approval or makes the process trickier and expensive.
But there is a way out. If you are not in a rush, then you can take steps to improve your credit score and then buy a house. Otherwise, you can consider these home loan programs for buying a house with 580 credit score in Houston –
- FHA home loans
The Federal Housing Administration (FHA) that is part of the U.S. Department of Housing and Urban Development (HUD), offers a home loan program. It can help you to fulfill your dream of homeownership with a low credit score. Under the program, the FHA will not actually lend you the money. Instead, it guarantees your home loan. It means if you default on a mortgage the FHA will repay the lender. So, the lenders can be more lenient about credit and income requirements. But mortgage lenders need to follow the guidelines and requirements of FHA.
To qualify for this loan, you will need –
- Proof of employment
- At least 500 credit score (but the higher the score the better it would be for you)
- Your monthly debt payments that are not more than 43% of your monthly gross income
Besides, there are other requirements. For instance, FHA loans have a maximum loan amount that varies based on where you are purchasing a home.
FHA home loans are a great option for buyers who have a poor credit score or who could not afford a small down payment.
- VA loans
If you are a veteran, military officer, or a surviving spouse and can abide by the eligibility requirements, then you can qualify for the U.S. Department of Veteran Affairs (VA) home loan program. As the name suggests, VA backs loans, these loans are backed by the VA. But VA approved lenders issues the loan. Besides, there are also VA direct loans, where the VA is the lender. But the loan is available to you only if you or your spouse are Native American.
Technically, no credit score is required to get approval for this loan. But many VA-approved lenders need a minimum credit score of around 580. This requirement is still below the credit score required by conventional home loan programs.
There are vital differences to consider in case you are eligible for both an FHA and VA loan. For example, VA loans might not require a down payment or monthly mortgage insurance, however, they could have a higher upfront fee. In case you will be moving again soon, it might make more sense to go with whichever loan has a lower upfront fee.
So, you need to compare the interest rates and monthly payments on the loan along with other things to find the best choice for you.