How do you prepare for the FHA government home loans for bad credit in Texas? We have mentioned everything you need to know.
How can you keep living in the same old apartment? As time flies by, you need a bigger space. Yes, buying a house seems to be a challenging task for first-time buyers. Don’t worry if there is not enough money left in the bank. The FHA mortgages are a great help for this type of buyer. The Federal Housing Administration does not issue the program, but the authority insures it. In this way, the lenders receive compensation when the borrowers default on the loan.
FHA loans offer adjustable-rate and fixed-rate options. If you have your eyes on a fixed-rate option, you can get the same rate over the loan term. Adjustable-rate mortgages have interest rates that change over the course.
If you are willing to consider FHA government home loans bad credit in Texas, here are a few things to remember.
Things Lenders See in your Application
Since FHA government loans are now a practical option for buyers of every income level, you need to prepare for the mortgage process. This is the time you would definitely want the lenders to prefer your application over others. For this requirement, you need to have steady employment. However, there are no minimum income range criteria, unlike conventional loans. Let’s have a look at the basic requirements for FHA loan programs in Texas.
- Credit score is a crucial factor because the down payment depends on it. If you have 580 or more, you are eligible for a 3.5% down payment. In case, your credit score is between 500 and 579, you can apply for a 10% down payment.
- Social security number proves that you are a lawful citizen of the United States and can sign for an FHA loan.
- Foreclosure history matters a lot because you may have to wait for at least 3 years. Meanwhile, you are expected to rebuild your credit.
- Bankruptcy on your report might cause you two years of waiting.
Private lenders typically have guidelines of their own, and the credit score qualifications vary. It is a smart decision to make an informed decision by comparing different lenders.
Pros of Choosing FHA Loans
A low credit score requirement is one of the benefits, as you have already found. The small down payments require private mortgage insurance, but a 10% down payment removes the PMI. Nevertheless, people with a shaky financial situation can find the best benefit from the low down payments, too. Another way an FHA loan helps is that you can get an assumable home loan. It is the type of mortgage in which the borrower may take over the seller’s home loan without having to apply for another loan. Also, a higher debt-to-income ratio is allowed. Make sure the total debt does not go beyond 43% of expenses.
In the end, FHA loans are versatile and you can also use the 203(K) program for home repairs. However, there may be lender restrictions – the loan benefits can help you look over the little cons. So, get started with preparation now!