In 2020, bad credit is as common as anything, and there is nothing to worry about. When you are struggling to purchase a house, the credit score is a massive issue. Because missed bill payments or reckless financial habits leave a dent on the credit score. When you are grappling with the bad credit score, the loan interest goes up. It goes without saying how the high-interest rates worsen the whole situation. For this very reason, a few mortgages cater to the bad credit.
USDA, VA, and FHA are three popular house loans for bad credit in Houston, and you should learn a few facts about them. The government-backed mortgages can help borrowers with 500, 550, or 620 credit scores. Of course, it is better to ask the lenders about the credit score requirement as it changes. Let’s have a look at a few rarely-discussed facts about the mortgages for bad credit.
USDA Loan Takes a Long Look at Income
Believe it or not, you might be disqualified for making too much money! USDA loan is not for every budget property you see in the market. The lenders consider household income while assessing the borrowers’ eligibility. Typically, the qualifying borrowers cannot earn 115% of the area’s median pay. So, the lenders check the household income, and a few eligible deductions are subtracted. Hence, the USDA income limits are based on the place where you live and the size of your family.
USDA Loan does not have Pre-Payment Penalty
Another benefit of the USDA loan is that the borrowers are exempted from the pre-payment penalty. With USDA loans do not ask for pre-payment penalty. Therefore, the borrowers can sell or refinance the loan, and they can pay off as they wish.
VA Loan has Forgiving Guidelines for Foreclosures
Usually, a two-year waiting period comes with VA home loans. In many cases, the veterans can be eligible for the mortgage after completing one year. The Department of Veterans Affairs suggests the borrowers co-operate with the lenders for finding a solution to avoid an impending foreclosure. At present, more than 50,000 people did not have to face the consequences of foreclosure. It is a safe product that does not require down payment either. Moreover, the home loan program puts a premium on the financial condition of the home-buyers. Following the exclusive requirement of residual income, the borrowers remain well-prepared to pass the obligations.
FHA Loans Available in Different Forms
The loan product offers a fixed-rate loan and an adjustable-rate mortgage. Even though the 30-year fixed-rate mortgage is the popular type, the lenders provide a 3/1 ARM and 5/1 ARM. So, the loan rate is flexible and depends on the one-year Constant Maturity Treasury Index. The borrowers can also apply for a 15-year fixed-rate mortgage, but the high monthly payment is crucial for the first-timers.
If you are confused about the term ‘bad credit’, you should address your concern to your lender. Also, when in dilemma about the ideal loan option, the lender offers the necessary help.
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.