Sharing is caring!
It may sound surprising, but mortgage lenders with low credit scores exist. If you are about to prepare for a conventional loan, wait! Conventional mortgages do not serve your purpose due to your low credit scores. The loan programs require more than 620 credit scores along with a 3.5% down payment. Most importantly, the credit or FICO score becomes the main obstacle on the way. If your credit score is bad, the risks of borrowing money are high. Low credit scores result in high-interest rates. On the other hand, the mortgage lenders for bad credit loans focus on offering competitive rates.
Now, the question remains: how do you get a green signal from the lenders in Houston? The higher credit score boosts your chances and assures lenders you can afford the mortgage. Your FICO must be between 300 and 850, and low scores affect your ability to land a mortgage. If you pull your scores, you can decrease risks with future lenders.
The article discusses how you can get acceptance from mortgage lenders for low credit scores in Houston. Let’s have a look below.
What do Mortgage Lenders Expect from You?
While you apply for a mortgage, the lenders begin the process by checking your credit report. You can also start the homework once you get hold of a credit report. The data in the report generates the FICO score. There are a few things that every mortgage lender checks in Houston,
- Credit utilization
- Available credit
- Debt obligations
The credit score determines your risk threshold and indicates whether it affects the loan terms. You can get a home loan with the FICO score being under 620. However, you will pay more than a borrower with excellent credit.
Take a Look at the Length of the Credit History
Long credit history does not necessarily mean you have a good credit score. It implies one simple thing: you have been paying off debts. Paying off debts is important for building a good credit score. No credit history might leave you in a confused state. The length consists of 15% of the credit score. If you want to get started, start spending small every month. Paying off credit card debts takes away the risk partially. When you already have a credit history and it is not looking great, focus on the payment history. Pay off the amount you owe and start off the process of rebuilding credit.
The Bottom Line
When you are in the process of improving your credit score, it is intuitive. It can take months to get things sorted, but you need to start as early as possible. When you maintain a credit history for a long period, it appears reliable. With your low credit scores, the lenders might encourage you to apply for VA, USDA, and FHA loans. The mortgage programs have unique requirements, and you should check whether you can meet the guidelines. So, do your homework and figure out the ideal option in Houston!