Do not Face Rejections for Mortgages: How to Find a Lender for Low Credit Scores
Low credit scores are not what your future lenders would expect from you. The loan officers always prefer borrowers who do not have credit risk. With low risk comes a stable financial situation, hence, there is no risk of default. On the other hand, mortgage lenders are relentlessly trying to fight off the economic uncertainties brought by the pandemic. Since the rate of unemployment has reached a new height, low credit scores are common. Of course, lenders are also afraid of whether unemployment might trigger late payments and eventual defaults. Nonetheless, many mortgage lenders still exist and they are willing to help those with low FICO scores.
In these trying times, some lenders have done the inevitable – increase the minimum credit score requirement and down payment. You might find a few conventional loans asking for at least 700 scores instead of 620. It is done to ensure borrowers are financially capable of making monthly payments. The government-backed loans like FHA, USDA, and VA are the best option for low credit holders. By drawing a contrast with the traditional mortgages, these programs do not require good credit scores or offer bewilderingly high mortgage rates.
But your question now must be: how do you secure low credit score mortgage lenders in Houston, TX? What are the tips that you must follow? Read the article and find out the tips you need to know.
Find a copy of your credit report
Once you develop an understanding of your credit history, you can instantly find out the element hurting the FICO scores. The credit report encompasses payment history and other personal information. It is a window to understand whether you have filed bankruptcy in the past. Once you have the credit report, you can check whether there are debts. Your credit score might not be as bad as you expected. The report is the only way to find all the answers.
Prepare for an FHA loan
FHA loans and low credit scores go hand in hand. The unfortunate situation of being rejected for a conventional loan might leave you anxious about your future of homeownership. Do not worry about higher interest rates, either. If you shop around for an FHA loan, you can find a better term. You can start discussing the matter with a mortgage broker if you want to find leads. The Federal Housing Administration has a minimum credit score of 580 and comes with a 3.5% down payment. If your credit is not above 580, do not fret. As long as it is between 500 and 579, you can still live up to your dream of buying a home. Borrowers with credit scores lower than 580 must have to pay down 10% of the loan value.
As you can see, mortgage lenders are willing to offer you the best deal if you work for it. Do your homework before going ahead with the application. You can also take time off for increasing the credit scores. So, compare your options and lenders while buying a house in Houston.