Houses are a necessity, and every person needs a comfortable accommodation for himself and his family. But houses are very expensive and can only be bought by affluent people. The less fortunate people have to depend on mortgage loans offered to them by the Department of Housing.
The first time homebuyers are not familiar with the steps of buying a home and also look for mortgage loans because they have moderate income and low credit score. Mortgage loans provide the best solution for aspiring homebuyers who wished to buy a home but cannot due to financial problems and low credit scores. The low credit score mortgage lenders Houston mostly provide the government assisted loans because banks do not give conventional loans on low credit.
The loan application of homebuyers is decided on three factors, which are credit scores, debt to income ratio, and monthly income. Credit scores are critical in acceptance of loans as lenders want to ensure the creditworthiness and ability of the borrower (homebuyer) to repay the loan on time. The credit scores are classified from 300 to 850 from FICO (Fair Isaac Corporation). The scores are represented 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
A low credit score means a person has missed his debt payment for a few months and may face difficulty in managing the monthly mortgage payments. The Federal Housing Administration (FHA) loans and Veteran Affairs (VA) loans are the best low credit score mortgage lenders Houston. The FHA loans are ideal for homebuyers looking for loans on low credit and also making a low down payment. The FHA loans can be obtained if the homebuyers make a 3.5 % down payment on poor credit score (580 or above) and a 10% down payment on bad credit score (579-500).
The VA loans also come under low credit loans as VA loans do not even have any minimum credit score criteria. The veterans and active military servicemen can easily qualify for the VA loans without the need of paying any down payment or mortgage insurance. The interest rates and closing costs of VA loans are also less than any other home loans.
The low credit score mortgage lenders Houston allow homebuyers to choose either 15 years or 30 years mortgage term only if they fulfill certain additional factors which are
- No outstanding debt
- No outstanding judgments
- Have stable employment and a high monthly income
- Have a low debt to income ratio; and
- No late debt payments for the last 12 months