The two most important things that a homebuyer needs to obtain a mortgage loan are good credit score and a high monthly income, but this requirement made it quite difficult for first time homebuyers with low credit score to obtain a home loan. The best loans which allow aspiring homebuyers to buy a home regardless of their credit scores are, without a doubt, the Federal Housing Administration (FHA) loans.
The FHA loans were introduced way back in 1934 to remove the difficulties that most people faced in acquiring loans for home ownership. The government insured the loans, which not only helped the potential homebuyers but also removed the financial risk of the lenders. The best FHA lenders in Houston offers the most affordable and lenient loan terms, which makes it easy for first time homebuyers to qualify regardless of their credit scores. The FHA loans are also termed as ‘bad credit home loans’ because FHA loans are the only loans that allow an ordinary citizen to obtain a loan even with bad credit as it means a person has missed debt payments for several months and can default on the new loan.
The credit scores are categorized by FICO (Fair Isaac Corporation) and range from 300 to 850. The scores are classified as
- Excellent score: 800 to 850
- Very Good score: 740 to 799
- Good score: 670 to 739
- Poor score: 580 to 669
- Bad score: 300 to 579
The best FHA lenders in Houston offer the FHA loans to potential homebuyers who meet the loan guidelines and requirements. The FHA loans are less risky for the lenders as the loans are guaranteed by the government. The FHA loans can easily be obtained by homebuyers having either a poor or bad credit score. The homebuyers with poor credit score (580 or above) have to pay 3.5% down payment while a homebuyer with bad credit score (500-579) has to make 10% down payment.
The FHA loan requirements are significantly easy to qualify as compared to conventional loans, particularly for homebuyers with low credit scores. The best FHA lenders in Houston make it easy for homebuyers to get 15-year or 30-year loan term. The debt to income ratio is also one of the deciding factors in home loans, and usually, the standard is 43%. The FHA lenders provide the FHA loans to homebuyers having the debt ratio as high as 50%.