Bad credit can happen to anyone. All it can take to damage your credit score is a few missed bill payments, some maxed-out credit cards or even some life circumstances that are beyond your control. When you have a lower credit score, it can be much harder for you to qualify for a home loan program. You can be subject to higher interest rates or you might need to come with a hefty down payment than someone with better credit.
However, that does not mean it is completely impossible to get a home loan with low credits. There are several home loan options for borrowers with low credit scores. You can search and opt for one of the reputable mortgage lenders for low credit scores in Houston. But before you start your search for a mortgage lender, go through the list to know about the loan programs that you can get with low credit scores.
It is one of the ideal options for people with low credit scores because this loan program has some lenient qualifying requirements. Insured by the Federal Housing Administration and offered by the FHA-approved lenders, this loan program is mainly designed for first-time homebuyers with low to medium-income. The FHA will accept credit scores as low as 500 with a down payment of 10% or more than that. You will need a 580 credit score to make the minimum down payment of 3.5%. So, if you are a first time home buyer and fulfill other requirements, you can easily opt for this loan program.
This loan program is established by the United States Department of Veterans Affairs for active duty or retired military veterans. There is no official minimum credit score requirements, no mortgage insurance premiums and no down payment requirements. Although there is no minimum credit score requirement, lenders offering VA loans ask for a minimum credit score. The foreclosure and bankruptcy waiting periods are the shortest of all the long programs offered. And it allows a VA borrower to apply for a new mortgage only two years after a bankruptcy discharge or foreclosure sale.
USDA loans are designed to help low-income buyers buy homes in mostly rural areas. Although the official minimum credit requirement is 640, the USDA offers exceptions for scores as low as 581. USDA loans follow the same guidelines as FHA loans for the length of time needed after a major credit event to apply for a new loan with the exception of bankruptcies that require a three-year wait.
These are some of the loan programs that can help you to fulfill your dream of homeownership with low credit scores. If you want to apply for other home loan programs that are not in the list mentioned-above, then you should take steps to improve your credit scores. It is not a herculean task; thoughtful and effective efforts can do so, and make yourself eligible for diverse home loan programs.
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.