FHA Government Home Loans Bad Credit in Texas: How it Works, Advantages & Drawbacks


FHA is a government-backed home loan which is a great choice for first-time borrowers. The mortgage originated at the time of the Great Depression, and ever since it has been popular. Mainly, the popularity flourished for the low to moderate earners. Now, millions and millions of homebuyers share their success stories with the loan. 

So, FHA government home loans bad credit in Texas has the elements to offer much-treasured homeownership. However, do you know the home loan works? Or, have you asked about its pros and cons? These answers are important to find out before diving into the loan process straight away. Therefore, let’s have a look at the essential pieces of information below.

Understand how FHA Home Loan Works 

Before everything, understand one thing – the Federal Housing Administration does not lend the money. The FHA-approved lenders are responsible for guiding the borrowers with the loan application. So, FHA carries out the role of insuring the home loan and offers a shield of protection for the borrowers. In return, the borrowers can get hold of low-interest rates. The forgiving credit score requirements and small down payments put the mortgage in advantage. However, there is a catch. There is a mortgage insurance premium that protects the lender. 

Things We Like about FHA Loans

The three biggest advantages of an FHA loan are – lenient credit score requirements, low down payments, and low closing costs. FHA loans let you put down as little as 3.5%, whereas the conventional loans would only allow a 5% down payment. As long as your FICO score stands at 580 or more than that, you can apply for a 3.5% down payment. If the credit score is below 580, you can get a 10% down payment. For helping a large number of people achieve their dream, FHA government mortgages offer a DTI ratio of around 43%. In the end, an FHA home loan is a far better option than any conventional mortgage. It is possible to buy a single-family residence and multi-unit property. Even when a VA loan is put in the line for its better benefits than FHA, the latter offers the loan for a manufactured home or condominium unlike the former.

Things We Don’t Like about FHA Loans 

Besides a fair share of pros, the cons are hard to overlook. Paying the MIP is not every borrower’s favorite in the list. Along with the upfront mortgage insurance premium, there is an annual premium of the loan price. The FHA buyers are expected to pay the premium over the entire loan term. Start calculating how much you will have to shell out over the next 30 years of your life. This is one of the reasons for making the mortgage more difficult than conventional loans. Apart from it, the property standards are not favorable to every borrower. The mortgage can put a pause in your dream due to its high standards.

Looking at the pros and cons might give you an idea: are you a perfect candidate for the loan? If you are still as indecisive as ever, it’s better to seek help from a professional FHA-approved 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.

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