The thought of purchasing a loan is more daunting than choosing the perfect abode, right? On top of it, the process becomes more complex, as you have less-than-stellar credit. There is a bright side to it; you can choose a mortgage with zero or 3.5% down payment.
In the meantime, remember, HUD indicates many borrowers as first-time borrowers. Most importantly, this does not need to be your first house to qualify. If you have not purchased a house in the last 3 years, you still have a shot at the first time home buyer programs with low credit scores in Houston, TX. Yes, the process is often nerve-racking, but there is no way to see your dream crumble to the ground. Once you think ahead of the down payment, house location, or loan application – the road will be smooth. Let’s have a look at the tips that every first-time homebuyer must remember.
Study the Down Payment Options
If your credit score is not in great shape, your financial health does not look good either. Everyone might have told you about credit score, but you should think of the down payment. Conventional loans ask you to put down 20% of the loan value, but the government-backed mortgages ask for 3.5% down payment.
Don’t get fooled by a low down payment; you still have to pay for 3.5% of the loan value. However, things can get tricky for a borrower with low credit scores. So, bad credit already puts you at risk before a lender. Only if you are willing to make a larger down payment, you can reduce mortgage payment.
Bad Credit vs. No Credit
Before understanding whether you have low or no credit, you need to understand the difference. No credit implicates that you could not manage debt well. You might have been avoiding debt to create positive net worth.
Now, low credit indicates you have had a past history of bankruptcy. 35% of the credit score refers to debt history. If you have defaulted on a loan before, this could also drag down your score. Start by paying off debt and bills. After all, showing up with no credit is worse than having low credit scores.
Compare the Loans for Interest Rates
When you are buying a loan, you are anticipating a heavy interest rate. When you have been trying to save for your child’s education or a new car, it is not easy. As observed by the Consumer Financial Protection Bureau, a borrower can save more than $3,500 if he compares the loans.
While comparing the mortgages, inquire whether the lender would permit you to go for discount points. Don’t forget to ask about the closing costs and other charges before signing an agreement.
In the end, first time home buyer programs are a success because FHA loans, USDA loans, or VA loans shine brightly in the hall of fame. To go over the process smoothly, you need a professional lender too. Of course, ask the lender whether the property location is eligible for the mortgage.