Did you know credit score is an important factor to determine a borrower’s ability to repay the loan? Yes, the professional lenders focus on the FICO scoring system in which the score ranges between 300 and 850. The conventional loans usually ask for at least 620 scores or higher. This is where the non-traditional loans differ because they can provide mortgage options with poor credit. Especially in the modern world, it is easy to have a bad credit score. Only with a few mistakes like making late payments and taking too much credit can drastically pull down the score. However, you are good to go with a low score only if eligible for FHA and VA loans.
However, many customers are yet to know important things about 500 credit score home loans in Houston. Hence, they have not gathered essential information regarding FHA and VA loans. Of course, it is never too late to catch up with the things you must know. So, you can start by bettering financial behavior to improve creditworthiness. It is true that part of rebuilding a credit score is a way to reduce debt. Hence, you need to be aware of a few tips to get the best benefits.
Know about FHA Loans
This is a government-backed home loan that is designed to offer homeownership in America. Only a few decades ago, you needed high down payments and excellent credit score to qualify for the loan. However, the FHA loan has changed the landscape ever since. If a borrower defaults on the loan, FHA reimburses the amount due. It reduces the risk for lenders and they can go for lower qualifying guidelines.
Understand the FHA Loan Benefits
The credit score requirement is 580 for allowing a 580 credit score. There are low mortgage rates and the FHA loan is easy to qualify. It is possible to use the gift money for 100% of down payment. Additionally, 15-year and 30-year terms are available for benefitting the borrowers most.
Know about VA Loans
VA loan comes with zero percent down payments and is available to veterans, military service members, and the surviving military spouses. The loan is implemented to help the returning service members buy homes without having the perfect credit. It is believed to be a historic benefit program. At present, the benefit has been more prominent than ever. The loan can be bought for the borrowers’ primary residence; however, there is no way to invest for a vacation home. The lenient credit score and income factors make the VA loan more convenient than a traditional loan.
Understand the VA Loan Benefits
VA and military borrowers can get access to the unique loan which is better than a traditional mortgage. There is no PMI required because the government backs the loan. Also, there are 0% down payments and this is unbelievable in today’s market. The loan is easier to qualify because of low or no credit score requirements.
There are other things to know about the VA loan and FHA loan and the lender can offer the much-required help. So, get in touch with a professional before applying for one.
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.