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Owning your dream home with a bad credit score is challenging because it plays a vital role in the entire home-buying procedure. If you have brilliant credit scores, you are on a safe side. However, at present, a poor credit score is not synonymous with a nightmare since there are so many options available. From VA loans to FHA loans, the mortgage world is your oyster only if you can pass the eligibility requirements. Before jumping right into the process, you should gather a few tips. In case, your credit score sinks lower than 500, no mortgage can back your life-long dream.
So, what score is required to buy a house? House loans for bad credit in Houston do not ask for more than 600 because conventional loans set the minimum credit scores at 620. If you are able to meet the credit score requirements, you can get the final nod for mortgage approval. The mortgages designed for first-time buyers or borrowers with low credit scores are typically insured by government agencies. So, here are a few loan products that can cater to your needs.
FHA Loan: 500-580 Credit Scores
As mentioned earlier, the FHA loan is easier to qualify than a conventional loan. The loan has a DTI ratio of less than 50% and a 3.5% down payment requirement. Remember, the mortgage needs mortgage insurance if you are putting down less than 20% of the loan value. Don’t worry about private mortgage insurance because the loan is available for approved condos, manufactured homes, and single-family residences. The loan terms might vary from one lender to another, but the FHA buyers can avoid foreclosures. When you are unsure about your financial capacity, discuss the situation with the lender. The lender not only walks you through the pre-approval process, but he also offers informed decisions for possible loan modifications. On top of everything, the mortgage can assist in upgrades and repairs by offering FHA Title I loans, FHA 203(K), FHA Energy Efficient Mortgage, and FHA 203(K) Refinance. Moreover, the mortgage (FHA Home Equity Conversion Mortgage) is available for elderly people with special loan benefits.
VA Loan: 550 Credit Scores
Many people have formed a misconception that the loan comes from the Department of Veterans Affairs; however, the truth is, the authority only guarantees the loan. So, co-ops are not available for the loan benefits and any empty lot is not eligible for this mortgage, either. Like FHA, you should use VA for primary residence only. It is possible to make additional payments over the loan term so that you can pay off the mortgage sooner. Additionally, you can make the extra payments any time and then save a fortune over the life of the loan. More importantly, an eligible veteran is free from paying down private mortgage insurance because he can get hold of the 3.5% down payment benefit. If you are willing to buy another house, pay down the precious one and get full entitlement of the VA loan again.
Now, you are fully armored with essential information regarding the mortgages for bad credit in Houston. So, what’s stopping you? Don’t forget to get a professional lender before everything!