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‘What is your credit score’ – is the general question that a homebuyer faces when applying for a home loan program. As your credit score shows your creditworthiness, a lender wants to check it before approving your loan application. While high credit score works in your benefit, a low credit score may be a reason for concern.
But you can get a 500 credit score home loans in Houston when you focus on other things. Here are a few things that can help you to get a home loan approval –
- Don’t make any credit mistakes
When your credit score is as low as 500, making any further credit mistakes will again lower your credit score. And then, it will be impossible for you to get any home loan approval. Rather you should try to improve your credit score by actions such as clearing all the previous debts, not making any hard inquiry, not applying for any new credit card, etc. All these things can save you from making any mistakes and thus, make sure that you can apply for a home loan program.
- Come with a large down payment
Your down payment amount can help you to get loan approval in spite of having a low credit score. Want to know how? Well, the larger the down payment amount, the lower a homebuyer has to borrow from a lender. Though a mortgage lender will not be ready to approve a large loan amount with a small credit score, he or she will be ready to approve a small loan amount. So, you should try to increase your down payment amount. It will be great if you can come with a 20% down payment. Besides, some of the loans allow down payment as gifts from relatives or family members. You can check these too.
- Be ready to pay a high-interest rate
An interest rate is an amount that a borrower has to pay over the life of the loan. Every homebuyer wants to secure as low-interest rate as possible because it helps them to save a large sum of money. But when your credit score is low, you need to pay a high-interest rate than others. So, prepare yourself to pay that amount over the life of the loan to ensure loan approval with a 500 credit score.
- Ask for quotes from different lenders
The mortgage lenders have their own set of requirements for homebuyers who want to get approval for a loan program. And so, the requirement varies from a lender to another one. While a lender asks for a high mortgage rate, another one may ask for a lower one. Without checking the requirements of different lenders, it will not be possible for you to understand. So, you should ask for quotes from different lenders, compare them and then go for the one that will be the best fit for your current situation.
So, getting home loan approval with a low credit score is not difficult when you consider these things. Besides, you can check FHA or VA home loan programs. You will get an approval.