Insured by the Federal Housing Administration and offered by the FHA-approved lenders, FHA loan is a specially designed home loan program for first-time home buyers. As it is a government-backed home loan, one can get approval for this loan with as low as a 500 credit score. So, it is the ideal home loan option for buyers with low credit.
You just search for reputable FHA-approved lenders and apply for the FHA loan 500 credit score Texas. Along with getting approval with a low credit score, there are other benefits too. Here we have listed down a few benefits for you –
- Lower down payment
FHA loans, along with other government-backed home loan programs such as VA loans for military service members and veterans, and USDA rural loans, require the lowest down payments. Conventional loans generally require a 20% down payment while for an FHA loan, the requirement is as low as a 3.5%. Low down payments allow borrowers to purchase homes and start building equity sooner.
- Lower mortgage insurance
Generally, the monthly mortgage insurance fee paid on an FHA loan is lower than the fee paid on a conventional home loan. It results in a lower monthly payment overall, even for the ones who can qualify for a conventional loan.
- Better interest rates
FHA loans offer the same interest rate for all homebuyers, so there is no interest rate penalty for the ones who have credit issues. If you qualify for the loan, you will get the current rate. Generally, FHA loans are very competitive, typically within 0.05 percent of conventional rates charged to the well-qualified borrower. These home loans provide credit-challenged buyers with the ability to qualify at rates that they could not get on conventional mortgages, once the conventional loan is adjusted upward the risk.
- Higher debt ratios
You can qualify with a higher total monthly debt for an FHA loan than you can for a conventional loan. Traditional loans allow for a new house payment of 28 percent of your monthly gross, or pre-tax income, while for FHA loans it is much higher. Your total monthly debt, along with car payments, credit card minimums and installment loans should stay under 36 percent of your monthly income for a conventional loan, while FHA guidelines allow up to 41 percent. You can see the difference easily.
- Liberal credit history
FHA loan guidelines don’t require a minimum credit score. Homebuyers can be approved with little or no credit history, as long as there is no negative credit history on their report. For those who have credit, they only need one year of clean credit history. You can qualify for this loan in as little as two years after a bankruptcy and three years after a foreclosure. Conventional loan guidelines need two years of clean credit and a minimum of 4 years after a bankruptcy or foreclosure.
So, would you like to apply for this loan? What to wait for? Start looking for FHA-approved lenders and apply for the loan today!