A low credit score might be one of the prime reasons behind the rejection of your application for a mortgage at a bank, but that is not the reason to back out of purchasing a house. A rejection from the bank is just a sign that you need to look for alternative options to fulfill your objective of purchasing a house. That’s what if the topic of our article here; financing options for buying a house with a 580 credit score in Houston.
Mortgage Options for Low Credit Score
A credit score of 580 is considered poor by traditional financing standards. For a full mortgage with favorable terms and interest rates that make it easy for you to repay the loan, you need a credit score of at least 700-750. However, in case you are falling short of the credit score then there is nothing to worry about; we have lots of alternatives to try.
FHA or Federal Housing Administration Loan is a government financing program that approves loan amounts to applicants with a credit score as low as 500. But with a FICO of 580, you can get better terms, one being the 3.5% down payment. If your score is below 580, then the down payment increases to 10%, and there is a high chance that the interest rate would increase as well. To get approved for FHA loans, you need to find a loan officer or broker, or private lender who is approved by the Federal Housing Administration.
VA loans are approved and facilitated by the Department of Veteran Affairs. The program was introduced in an attempt to make buying a house easier for veterans and people in active service. The spouses of veterans killed in action, or deceased from a complication caused by injury in war, are also eligible for the loan. A simple eligibility inquiry with the loan officer would help you get clarity regarding applying for the loan. VA loans require a minimum FICO of 580. Unlike the FHA loans, the applicant is not required to make a down payment against the loan.
The other way that you can get mortgage approval for buying a house with a 580 credit score in Houston is by co-signing the loan with a family member who would act as the guarantor for the loan. Make sure you get in touch with a trusted loan officer or finance broker to get in touch with a suitable private lender, who can offer you lucrative terms for a mortgage.