Bad credit is quite a natural phase for every future homeowner – don’t sweat over it. All it takes to get out of the mess is on-time payments and well-planned financial habits. When you already know that the credit score is on shaky ground, you can start preparing. Poor credit history affects the mortgage application and can turn it into an expensive purchase. When you are not rushing to it, take time, and improve credit scores before the big purchase.
Make sure the bad credit does not become a roadblock that crushes your dreams into a million pieces. Don’t worry; the market has plenty of house loans for bad credit in Houston. These loan options offer competitive rates along with a myriad of benefits. The government loans are preferred choices for borrowers with bad credit. Since the government mortgages are backed by the government, the guidelines are less stringent. Of course, you can give conventional loans a try when you have a minimum of 620. Unfortunately, many borrowers cannot afford the conventional mortgages due to their low FICO scores and large down payment requirement. So, let’s figure out how you can manage to have a mortgage with bad credit in Houston.
Check credit scores
It is important to check your credit report in the earliest stage of the house hunt. This can give you a sense of whether you are really focusing on the loan programs. So, what does qualify as a good credit score or a bad credit score? The mortgage lenders usually get reports from Equifax, TransUnion, and Experian for reviewing. The exceptional credit score starts from 800, and the poor credit range is between 300 and 579. Private lenders pick the middle score and use it for approving the mortgage. For example, if the FICO score is below 500, you need to work on it first. But if the score is 500, you can apply for an FHA loan program. When your credit score is above 600, you can qualify for conventional mortgage programs.
FHA loans for low credit scores
An FHA loan is a useful option for borrowers with low credit scores since the program comes with flexible qualifying requirements. The loan program asks for at least 500, and you will have put down 10% of the loan value. If you can work on your credit score and make it to 580, your down payment will be 3.5%. The FHA loan programs come with shorter waiting periods and allow foreclosures and bankruptcies. Remember, the low down payments lead you to private mortgage insurance premiums.
VA loans for zero down payment
Exclusively designed for military veterans, VA loan programs have zero down payments. Moreover, some of the loan programs offer loans with 500 or 550 credit scores. Besides the low credit requirement, borrowers need not pay the mortgage insurance premium and down payment. The waiting periods for bankruptcies and foreclosures are also shorter in comparison to other loan programs.
Fortunately, your credit score does not pose a threat to your dream homeownership. Make sure your profile does not carry much of the risks. So, get in touch with a lender now!