Are you planning to fulfill one of your long-cherished dreams of having your own house? Then, one of the first things that you have to consider is your credit score. Your credit score is a statistical number that evaluates your financial trustworthiness to the mortgage lender. It not only helps you to get multiple quotes from several lenders but also ensures the best rate over the life of the loan.
Though credit score plays a crucial role in the process of getting approval for a home loan, you can still get a home loan even after having a bad credit score. There are lenders, who offer 500 credit score home loans in Houston. But to get it, you need to use some tactics. Here, we have listed a few for you –
- Check eligibility for FHA or VA loans
Once you know that you have a poor credit score, then the next thing that you need to look for is to see whether you are a candidate for an affordable mortgage backed by the Federal Housing Administration (FHA) or Department of Veterans Affairs (VA). If you are a first-time homebuyer, you can qualify for a 10-percent down payment FHA loan with a credit score as low as 500. On the other hand, if you are a military service member or a veteran, you can apply for a VA loan. No minimum credit score is required for VA loans. So, if you have a low credit score, you can apply for any of the home loan programs based on the eligibility criteria.
- Come with a hefty down payment
If you can’t qualify for an FHA or VA loan, you will need to shop around for a conventional loan. One of the ideal ways to improve your prospect in this arena is by coming with the largest down payment that you can. Mist lenders consider three things when deciding whether to approve your mortgage application – debt-to-income ratio, credit score, and loan-to-value ratio, or LTV. You can offset a poor credit score with a large down payment, thus, improving the LTV. A large down payment can also help make you more attractive to lenders, as you will need to borrow less money for buying a home and have more equity in the home.
- Look for a guarantor
If you are unable to get a mortgage because of bad credit, you can look for a family member, who will be ready to be named as a guarantor. Getting a guarantor is a big step. It is because you and your guarantor will be tied to each other financially. It could have an impact on both your credit ratings. Your guarantor would have a charge placed against their own house. It means, if you default on your mortgage payments, the guarantor will be liable for this.
So, you can see that you can get a home loan even with a low credit score. Then, what to wait for? Use these strategies when looking for low credit score home loans and ensure approval from the mortgage lender.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.