Know Why FHA Loan 500 Credit Score can Cater to First-Time Homebuyers in Texas
If you are a first-time homebuyer, FHA proves to be a great decision for many. Along with low down payment requirements, the low credit scores attract the borrowers more. When you are looking at a primary residence, the FHA loan caters to many benefits. Before obtaining the mortgage, you should understand that the credit score leaves an impact on many aspects of the loan. The buyers with poor credit scores always have a crucial time to get approved. However, they should not leave their dream of achieving homeownership easily!
When you have faced rejections for the traditional loans, the FHA loan is quite helpful. In the meantime, you must know that 580 is the tipping point to be eligible for the 3.5% down payment. However, the lowest mark for credit scores is 500. At this time, the buyers are eligible to pay down 10% of the loan value. Still, the down payment and credit score requirements remain lower than a traditional mortgage. Usually, a traditional lender asks for a 20% down payment and 620 credit scores. There are surely other things to know about FHA loan 500 credit score Texas before choosing. Go through the following tips to figure out how FHA mortgage is beneficial for the buyers.
Considering an FHA Loan with 500 Credit Scores
In order to qualify an FHA loan, you should have at least 500 credit scores. If you have 580 or higher credit scores, you can make a down payment of 3.5%. Now, there are certain things to remember while applying for an FHA loan. Take a look below.
- There are no minimum income limits; however, you must ensure the lender about your capability of repaying the loan. Even if you have a high income, you cannot get disqualified.
- The Federal Housing Administration fixes the loan amount and it changes according to the neighborhood.
- A borrower must have reasonable debt to income ratio for qualifying an FHA loan. In comparison to the income, monthly expenditure must be lower.
- It is essential to find an FHA lender who follows standard guidelines for the mortgage.
There are plenty of benefits to FHA loan including small down payment, assumable loan, and gifts for closing costs or down payment.
Understand the Average Credit Scores among Buyers
Every month, the lenders can get hold of essential insight into loan standards and trends. The report indicates the credit scores for loans that were closed and processed. If the past reports are analyzed, the FHA mortgages successfully closed range between 600 and 799. Only a scanty number of people having 550 to 599 opted for the mortgage. Additionally, a smaller number of closed FHA mortgages approved of 500 to 549 credit scores. So, the credit scores starting from 500 will meet the standard guidelines of HUD. When your credit score is more than 600, the chances for approval are higher.
FHA mortgage provides a set of advantages to the borrowers and the loan is easier to qualify. Along with low-interest rates, the loan fees are low. There are other things to know about the credit score, get in touch with a lender!
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.