Financing with bad credit is challenging, especially when you need to pay a 20% down payment. There is a way to overcome the difficulty only if you obtain a suitable mortgage. The traditional home loans do not cater to such problems at large, and FHA loans emerge at such times. Offering the ideal circumstances, different types of FHA loans are for borrowers with damaged credit.
Thriving with popularity, FHA government home loans bad credit in Texas have undemanding qualifications. Besides the easy-to-pass requirements, the mortgages are designed for moderate- or low-income homebuyers. Furthermore, multiple benefits wait for the borrowers, as well. If you are interested in the government-backed FHA loans, here’s what you should know.
Credit Requirements for FHA Loans
For anyone applying for an FHA loan, the borrowers need to have at least a FICO score of 580. Only this way, they can unlock the lowest down payment advantage, which is 3.5% of the loan value. If the score is lower than 580, but more than 500, you can still obtain the mortgage. Borrowers having credit scores between 500 and 579 can apply to avail a 10% down payment. If you want to invest in a house, and the credit score does not pass the credit requirement, you need to calculate the advantages and disadvantages of putting a small or large down payment. You can also follow the tips for improving credit scores.
FHA Adjustable Rate Mortgage
Even though borrowers struggle with poor credit, everyone is in a different financial situation. Adjustable-rate mortgage specifically targets the moderate-income families to help them achieve homeownership. This loan program maintains the mortgage payments and loan rates to the minimum. FHA adjustable-rate mortgages help the homebuyers who fail to meet the requirements of conventional loans. It further offers protection to the lenders against the defaults on the mortgages for single-family residences and manufactured homes. Remember, the loan has lower payments in the beginning, but the rates go up with FHA government home loans bad credit in Texastime.
FHA Fixed-Rate Mortgage
A fixed-rate mortgage is likely to surpass the popularity of adjustable-rate mortgages. This loan program is specially designed for first-time homebuyers. A homebuyer can expect the financing up to 97% of the mortgage, and the closing costs and down payment are low. It is the only one FHA loan program for which authenticated family members can pay for the closing costs. FHA fixed-rate mortgage serves multiple advantages for those who have not been able to put enough money for the purchase. The homebuyers who have low credit scores due to foreclosure or bankruptcy can obtain the mortgage.
Besides these convenient options, FHA offers other effective home loans. FHA reserve mortgage, FHA secure refinance loan, growing equity mortgage, energy efficient mortgage, and condominium loans – these are only a few to name. Discuss your financial struggle with an FHA-approved lender before picking up the right type of mortgage. Of course, don’t forget to pull up your credit score before finalizing the decision. So, find an FHA-approved lender before diving into the process.
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.