You want to apply for an FHA loan with a 500 credit score. But the myths are creating confusion in your mind. Read on to be familiar with reality.
Checked your credit score from three major credit bureaus of the U.S. and found it is around 500? Wondering what to do? How to fulfill your dream of homeownership? Well, opt for FHA home loan programs. Insured by the Federal Housing Administration, these loans have lenient requirements. And so, you can get approval even with a 500 credit score.
There are several lenders who offer approval for an FHA loan 500 credit score Texas. You can opt for any of the lenders to get loan approval. But are the myths creating doubts in your minds? Here, we have debunked these for you -
- These loans are designed only for the first-time homebuyers
No, it is nothing but a myth. Why first timers prefer to opt for this loan program is due to the minimum down payment requirement. One can get approval for an FHA loan with as low as a 3.5% down payment. Moreover, first-timers can take advantage of the liberal non-owner occupied income allowance. There are some grants, which can be used to assist with the down payment and closing costs and they might require the buyers to be first-timers. But FHA loans don’t have any such requirement.
- It needs a long time to get approval
It is not true. FHA loans are government-guaranteed loans. However, that does not mean that the FHA is directly involved with the loan process. Actually, the FHA program is a set of guidelines that the lenders should follow to receive the government guarantee. As long as the lenders follow the protocols and the loan eventually goes into default, the lender will be compensated at 25% of the loan amount. However, the FHA does not approve the loan. It only interferes when the home loan goes into default. FHA loans take no longer or shorter than any other type of loan program.
- FHA loans can be used only to buy a single-family home
No. One can use an FHA loan for buying multi-family homes and condos too. Approving a condo purchase need that project to be FHA approved, but once the project received approval, all future purchases using an FHA can be used. Individual mortgage lenders can approve a home loan project on their own. But without the approval the loan is partially correct, you can’t use an FHA loan for buying a condo.
- FHA has universal guidelines
Nope. What is reality is that FHA offers guidelines that the lenders should follow to be eligible for the FHA loan guarantee. But the lenders can also add their own internal requirements, known as overlays, in order to reduce their own level of risk. It means while one lender might approve a loan with a particular credit score, another lender may not. If a loan is not approved by one lender, another might be able to help.
As the myths are now debunked, you should start looking for the lenders who offer FHA loans with 500 credit scores and apply for the loan today.
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