A credit score is one of the biggest factors in the mortgage process. If your property location passes the requirement and the credit score does not, you will be declined for the home loan. Of course, the FHA loan requirements comprise of many other factors. This loan program was launched in 1934 to encourage buyers who had faced issues in qualifying. After 31 years of its introduction, the mortgage was a part of the Department of Housing and Urban Development. The loan requirements were outrageously rigid much before the appearance of FHA loans. Thankfully, the mortgage industry has started to change and brought affordable options for every type of borrower.
Did you know borrowers were compelled to put down 50% of the property before FHA? Yes, it would have been more than difficult in this century! The FHA loan requirements Texas are flexible and cater to borrowers with less-than-perfect credit scores. Lenders modify the guidelines so that more buyers can afford the program.
If you are getting started in the FHA loans, it is critical to gather knowledge of the requirements. From the minimum credit score to the down payment, it is essential to figure everything out. So, let’s have a look at the FHA loan requirements before diving into the process.
What are the FHA loan credit guidelines?
The credit scores typically range between 300 and 850, and the higher credit score ensures lower interest rates. If your financial situation is on shaky ground, check whether it is above 500. The bare minimum requirement for the FHA loan is 500. But you can access the lowest down payment only if you have 580 scores. The FHA loan programs might help you qualify for lower credit scores, and you cannot get this benefit for conventional loans.
How much do you have to put down for FHA loans?
FHA offers the most affordable home loan options. And its credit score guideline is one side of it! Of course, the credit score is linked to the down payment amount. If you have low FICO scores, the upfront costs will be much higher. 10% down payment is only available when you have 579 or lower credit scores. On the other hand, a 3.5% down payment is available when your credit score is 580 or above.
For example, you might have to put down $20,000 for a home ranging around $200,000. This is only applicable for 550 credit scores. When the score is higher and around 600, you might have to put down $7,000 on the same amount. Your down payment and credit scores influence your FHA loan qualifying process. When the FICO score is on the decline, it is better to choose a shorter-term home loan.
The best way to get a reasonable deal on the mortgage is to go through the loan requirements. Whether you are applying for an FHA or conventional loan, it is an important thing to remember. So, find a smart lender and gather all the information about the loan program.