How are you preparing for a 500 credit score home loan in Texas? Read the article now!
Are you surprised to hear you can land a mortgage with 500 credit scores? The low credit does not determine your future as a homeowner. Of course, many times you must have heard that a mortgage is out of your reach with such low credit scores. Low FICO scores can limit your options, but the right strategy can help you earn success.
The Federal Housing Administration launched a mortgage program during the Great Depression, and the option is still viable in 2021. FHA loan is one of the best 500 credit score home loans in Houston. So, let’s get down to the process. How low is your credit? Is it lower than 660 or 550? Every lender has a different definition of low. When your score is above 500, it is not exactly low. However, the credit needs a little perfection. Mortgage lenders depend on your credit scores before making a decision. If the credit score dips low, anywhere around 300, you are in trouble. No mortgage can help you when your credit score is lower than 500.
If we think of a 500-credit-score-mortgage, the FHA loans appear. The flexible guidelines are much helpful for anyone with relatively low credit. So, let’s go through the necessary information you must know about FHA loans in Houston.
FHA Requirements in Houston
The Federal Housing Administration demands at least 500 credit scores to allow borrowers to apply for an FHA loan. Of course, the credit score requirements change according to the lenders. If your credit score is between 500 and 579, you can make a down payment of 3.5%. The latest FHA policy indicates that private lenders have begun the process of making the requirements more flexible. This turns out to be a benefit for many people who wish to own a house. Since the inception, the loan itself has helped thousands of buyers realize their dream. The new policy opens the floodgate for new home buyers in the upcoming months. Of course, the boundless popularity is linked to flexibility. The mortgage appeared in the market with the sole intention of encouraging homeownership.
FHA is More Flexible than Conventional Loans
Fannie Mae and Freddie Mac serve the purpose of offering a low down payment. A borrower can apply for a 3% loan if he/she managed to have a credit score above 620. Besides these benefits, the mortgage does not fit the flexible criteria. In this case, FHA inches towards the finish line with low-income requirements, down payment as a gift, co-borrowers, income from various sources, and low credit scores. Since 1934, millions of homeowners have landed FHA loans instead of paying rents. As an aspiring homeowner, you can work on your credit score for better terms and rates.
The Bottom Line
The FHA loans are not out of your reach, but you should remember the requirements. Your low income along with bad credit is not a matter of concern. In case your credit score is unbelievably low, provide an explanation. So, good luck with the house hunting!
6264