You always want to have a good credit score. But you never know when some intentional or unintentional mistakes affect your credit score severely. Although there is always a chance to improve your credit score by making wise steps, if you want to get a loan approval early with a lower credit score, you may wonder what to do?
Are you thinking of buying a house with 580 credit score in Houston? But how to ensure this? Is there any way out? Here are the factors that you can focus on to get loan approval with a 580 credit score –
- Down payment amount
Coming with a hefty down payment will signal to your lender that you are more creditworthy as a buyer. And it will give you a better chance of getting approved for your mortgage and can lower your interest rate. Are you financially secured? Then, you will have a better chance of getting approved and obtaining a lower interest rate, even when your past finances influence your score negatively.
- Debt-to-income ratio
This ratio measures your ability to make payments toward money you have borrowed depending on your total minimum monthly debt divided by your gross monthly income. Your mortgage lender can consider things like car loans, credit card debt, home equity loans, and more to calculate this percentage. Most lenders prefer a DTI less than 50% as acceptable when qualifying you for a mortgage. But keep in mind that the lower your DTI, the more loan options will be available to you.
- Income and assets
It is another crucial factor that determines your mortgage eligibility. Put the more income you have, and you are likely to have a lower DTI and a better chance of making your mortgage payment every month. It makes the loan less risky for the lender. Assets are also important. It is because you need savings or other resources to be able to come up with a down payment for your home and based on the type of loan you are getting, the lender may require you to have what is known as reserves. Generally, a higher down payment means a lower interest rate, so having these assets can be crucial.
- Work history
Your work history is as important as your income. Your lender wants to check whether you will continue to get paid. It is one of the risk factors they will examine closely when you apply for a home loan. Mortgage lenders will sometimes approve you with as little as a year of work history, but 2 years are what they like to see. Besides, try not to change jobs unless you get a highly-paying job.
Work on the above-mentioned things and shop for lenders to get a home loan with a 580 credit score. You will soon be a proud owner of a house.