Even though you have adequate funds, did you know mortgages can ease your way? Only if you can manage a home loan, you can achieve your dream without a fuss. Think of it as a tool that can only push you further toward the goal. A mortgage benefits numerous people with approximately 90% financing and more. But did you know the credit score has a strong influence over the mortgage process? Lenders use the credit score to understand whether you can pay back on time.
If your credit score is in a trembling state, you may face rejections for conventional home loans. However, you can find different types of house loans for bad credit in Houston. Yes, high credit score boosts lenders’ and borrowers’ confidence. But the bad-credit mortgages are designed for borrowers with risk factors. For example, the Federal Housing Administration insures a part of every mortgage for the lenders. Less-than-optimal credit is not an issue, and you do not have to give up on the dream of owning a permanent house. You can go over a few necessary tips and understand how the mortgage process needs to run. So, let’s take a look below.
Understand the Levels of FICO Score
Before getting into the low credit loans, understand how the credit ranges affect the mortgage applications in Houston.
- Excellent (800-850) credit scores offer the best loan terms and lowest interest rates.
- Very good (720-799) credit scores provide favorable loan terms and interest rates.
- Good (620-719) credit scores offer slightly higher interest rates than the previous ones. You can still get approved.
- Fair (580-620) credit scores demand less debt, along with much higher mortgage rates.
- Poor (<580) credit scores may not guarantee approval, and you will pay high down payments and interest rates.
Bad credit is the result of missed payments, high outstanding balance, and new credit accounts. Even though traditional loans are not in favor of the low credit scores, the government-backed mortgages are.
Subprime Loans for Bad Credit
When it is not particularly easy to buy a mortgage with low credit, it is not impossible either. It is very crucial to check the loan terms and find out the potential risks before finalizing the offer. Subprime loans are available, but you have to deal with high-interest rates and less advantageous terms. There is also a risk of facing rejections from major investors. If you are ready to tolerate the high loan rates, you should look at the drawbacks.
FHA Loans for Bad Credit in Houston
Since subprime loans cannot be everyone’s cup of tea, FHA loans are worth considering. A government-insured loan has enough standard terms, including a 3.5% down payment. If your credit hits as low as 500, you can still get approved for a 10% down payment. Even if you already have a mortgage and are looking for, choose an FHA streamline.
When you have gone through a lot for a credit score, make sure the process does not get delayed for a down payment. So, get in touch with a lender who can help you.