In order to offer relief from the uprising caused by the Great Depression, the government-funded projects surfaced. In the meantime, the Federal Housing Administration contributes to better housing conditions and enhances the rate of homeownership. In the modern world, people choose cramped apartments over a spacious shelter for the rest of their lives. To those people lacking a primary residence, FHA loan is a boon. Especially, the economical options are running out fast and the financial crisis is increasing. Amidst all the uncertainties, this home loan allows credit score as low as 500.
On the other side, nontraditional borrowers know only a little about the FHA loan. If the credit score is lower than 700, customers are getting rejected for the conventional house loan programs. FHA mortgage is buyer-friendly with low-interest rates and down payment. Among the first-time homeowners, FHA house mortgage has become significantly popular. Also, the contribution of FHA authority marks the safety of the lenders from money loss. There other facts about FHA loan 500 credit score that you cannot miss before applying. To know more, read the rest of the article.
FHA Loan Eligibility and Credit Score
According to the Single-Family Handbook, loan eligibility is completely dependent on the credit score. If you go through the guidelines, you will understand that the 580 or above credit score offers the highest benefits. When you have an excellent score, you can unlock a loan-to-value ratio of 95%. If the credit score is between 500 and 579, you are left with little to maximum loan-to-value ratio of 90%. When the score is 499 or lower, you will never qualify for the home loan.
Get Low Down Payment
The conventional loans have larger down payment than FHA insured loans. At this time, the credit score again plays a crucial role in fixing how much you are going to need. For example, when your credit score is around 580, you can get 3.5% down payment. If your credit score ranges from 500 to 579, the down payment will be of 10%. If your credit score is heading south, you can consult with a professional to utilize any special circumstances or allowances. In this situation, a co-signer or non-occupant co-borrower can come forward to help.
No or Low Closing Costs
Inspections, appraisal fees, broker commissions, and credit reports – these factors add up the closing costs. The costs are lower when it is an FHA mortgage. Of course, the costs generally vary from lender to another. It is best to ask the professional for what closing costs you are accountable for.
Contact FHA Approved Lenders
Federal Housing Administration does not approve the loans. The authority is only responsible for ensuring the funds. In any case, you need to get the house loan from an FHA-approved lender. It is better to check the interest rates and other services beforehand.
Now, you know multiple facts about FHA loans. You can still resort to the professional lenders to gather more information and make the decision even with a low credit score.
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.