Can You Get Home Loans in Houston if Your Credit Score as Low as 500?

Before opting for a mortgage, there are two things needed – financial stability and mental preparation. Even if you have dealt with the mental composure, the former often does not agree at the same time. In this context, the credit scores should be mentioned because this factor carries out a major role. Before sanctioning the home loan, the lender always checks whether the person has the ability to repay. Now, this starts with the credit score because the credit report works as an indicator. If you have low credit, you will face rejection for home loans.

So, how low is actually low? There are 500 credit score home loans in Houston and the 500-mark set the record being the lowest. Usually, the conventional loans need a 620 credit score for proving someone’s eligibility for the mortgage. The range between 300 and 850 is considered before reviewing the credit history. However, the borrowers cannot fetch the best benefits from such a low credit score, either. If you are worried about getting approved for home loan, you should keep certain things in memory. Go through the article further to gather useful pieces of information regarding this.

Why is the low credit score unacceptable for home loans?

If your credit report is standing on shaky ground, there is a high chance of default or delinquency. The percentage of people falling 90 days behind a mortgage may often see the score increase by 50 points if the data is collected from their credit report. Once your account goes on default, the credit score will fall again. Bankruptcy is another bad thing happen to borrowers with low score. A credit report may take 7-10 years to recover but you can speed up the method by paying bills on time.

Is it possible to get a mortgage with a bad credit score?

There are numerous lenders who never offer mortgages to people with poor credit. A subprime mortgage is a loan with a higher interest rate than the traditional loans. If the borrower has prime or better credit, the loan is accessible. However, other features of such loans prove to be risky. Generally, the subprime loans start with adjustable-rate mortgage and the interest is lower than the fixed-rate mortgage. But the monthly payment and interest rate may go up after the initial stage. Apart from this option, FHA loan works well and the level of risk is not so high.

Can you choose an FHA loan with 500 credit scores?

Minimum credit score necessity for FHA loan is widely linked to the applicant’s needs. An applicant should have 580 or more to secure most of the financing. According to FHA guidelines, the borrowers with credit score between 500 and 579 have only 90% LTV. However, applicants with credit score lower than 500 cannot be eligible for FHA. The loan does not offer allowances for applicants with insufficient credit or irregular credit history. Only if the customers meet the FHA requirements, things may look different.

If you are stuck with poor credit, there will be enough problems. So, you can get help from the professionals and repair the report for a home loan.

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.