When you are dealing with low credit or bad credit scores, do not worry! An FHA loan can save your dream just when the conventional mortgages have refused to fulfill your life-long dream. Even when your credit score is as low as 580, you can hope to buy a new property.
Nowadays, lenders can approve borrowers with less than stellar credit scores. As long as they have a stable income and meet other requirements, the borrowers can dream of buying a house with 580 credit score in Houston. Since FHA loans are still a new thing to many of you, it is important to give the rest of the article a read.
Put down more than 3.5%
The best part of choosing a poor-credit mortgage is that you can enjoy the benefit of 3.5%. If this is not the main reason to pick an FHA loan, you should evaluate your down payment choices. When you are putting down 3.5% or 10%, private mortgage insurance is tagging along. The lenders ensure the borrowers with flexible PMI options; however, 20 percent down payment does not ask for private mortgage insurance. When you are going for less than 20 percent, the mortgage is becoming slightly expensive. When you appear to the lender with low credit scores, your case will be categorized under compensating factors that balance out the dents to the credit scores. A heavy down payment is another compensating factor because the borrowers always work hard to avert foreclosure. Remember, the less money you are putting down upfront, the more you are going to pay for the interest rates over the loan terms.
Consider FHA 203 (K) Improvement Loan
This is a type of FHA loan that considers the expense of particular renovations and repairs in the mortgage. The loan program lets you borrow money for home improvements and home purchases. When you are running low on the cash front and cannot make a large down payment, the mortgage can be an unsung hero.
Difference between FHA and Conventional Loans
Established earlier, the FHA loans are available for 500 or 580 credit scores and you can apply for a 10% or 3.5% down payment. On the contrary, the conventional loans offer down payment between 3% and 20% only when your credit score is higher than 620. You cannot apply for a down payment assistance program for a conventional loan, unlike FHA loans.
Search FHA-approved Lenders
As you can understand, the FHA mortgage is famous for a down payment as low as 3.5% for borrowers with 580 credit scores. Due to the lenient credit score requirements, the mortgage has gained much popularity among the borrowers. The conventional mortgage lenders cannot approve of such a scenario when you do not have 620 credit scores. Only the lender who has an FHA approval and is willing to originate, endorse, close, underwrite, hold, and purchase an FHA-insured mortgage can be the perfect fit for your situation.
An FHA loan sounds great and it is a feasible option when you pay attention to the above-mentioned tips. For more tricks and tips, take the help of your 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.