Before you apply for an FHA loan with a 500 credit score, you need to know a few basic things about the loan. Read on to know about these.
Are you a first-time homebuyer? Are you looking for home loan options to fulfill your dream of homeownership? Then, an FHA loan will be the go-to choice for you. Insured by the Federal Housing Administration of the U.S. and offered by the FHA-approved lender, you can easily get approval for this loan.
As the FHA will pay back the loan if you default, the lenders easily approve the application. So, you can get approval even for FHA loan 500 credit score Texas. But before that, you should familiar with some basic things related to this loan -
- These Loans Have Lenient Qualification Requirements
You can easily qualify for an FHA loan than a conventional one. While conventional loans need a huge credit score and down payment, FHA loans have lenient requirements. The basic requirements for these loans include a 500 or higher credit score, at least 3.5% down payment, a debt-to-income ratio of 50% or less than that, and the home should meet the property requirements of the FHA and your primary residence.
- These Loans Need Mortgage Insurance
It is mandatory for all FHA loans. Unlike the private mortgage insurance that is paid by conventional borrowers who put down less than 20%, this insurance can't be canceled as you gain sufficient equity. If you come with a lower down payment amount like 10%, FHA mortgage insurance lasts for the life of the loan. And with a 10% or more down payment, you will pay the insurance for 11 years.
- These Loans Can be Used for Different Types of Houses
There is no such guideline that this loan can be used only for a single-family loan. Guidelines for buying FHA-approved condos recently broadened. And for this, you can use this loan to buy a multifamily home or a manufactured one. Irrespective of the type of loan you buy, in all cases, it should be your primary residence. For instance, if you buy a duplex by using an FHA loan, you need to live in one of the units.
- The Loan Terms Can Vary by Lender
Although the FHA sets the minimum requirement, individual FHA lenders can have stricter standards. For instance, an FHA-approved lender can set their minimum credit score standard as 580 in place of 500. As lenders determine their own rates and terms, it is always better to shop around and compare the rates before finalizing a lender.
- You Can Get Help Avoiding Foreclosure
In case you are not sure whether you will be able to make your next FHA loan payment, or if you have already missed a payment, get in touch with a lender to discuss your situation and for avoiding foreclosure.
An FHA loan is the best choice for buyers with a low credit score. So, without waiting any more, find a reputable FHA lender and apply for the loan today!