You have a twinkle in your eye as you are browsing at houses on the internet, in newspapers, and enthusiastic about the possibility of bettering your living condition. There is just one problem that is your bad credit score.
Buying a home with a credit score of 580 will be difficult. The average FICO score of an accepted home loan purchase mortgage is 686, but nowadays many program requirements call for a 580 credit score.
Don’t know if buying a house with 580 credit score in Houston is possible? Read below to understand how you can get loan approval with low credit scores.
Which Home Loans Are Available at 580 Credit Score?
The credit score requirements can vary from lender to lender, and some lenders give more priority to your repayment history, property price, etc, rather than credit score. But you can usually qualify for two types of loans with bad credit, which includes
The Federal Housing Administration backs FHA bonds, which are government-backed mortgages. They need the least amount of credit for any form of home loan. A 3.5 percent down payment is needed for borrowers with a credit score of 580. You could be liable for a 10 percent down payment with a credit score of 500, but few FHA lenders deal for scores below 580.
- A minimum credit score of 580 with a 3.5 percent down payment and a gross debt-to-income ratio of 50%.
- After a bankruptcy, there is a 36-month waiting time.
The Department of Veterans Affairs guarantees VA loans, which are 100% covering home loans. Since the VA does not have a credit score provision, lenders may have their own minimum credit score requirements. To be considered for a VA loan, you must have a credit score of 580 to 620.
- A minimum credit score of 580-620 There is no deposit needed.
- There is no need for mortgage protection.
What Are The Other Factors After Credit Scores That Lenders Consider?
When deciding whether you’re qualifying for a loan, lenders consider more than just your credit score. And if you have a good credit score, if you have a history of late payments or bankruptcy, the loan will be rejected.
Bankruptcy would not prevent you from obtaining a mortgage. After a 24-month waiting time, you can apply for a lease, or 12 months if you have extenuating circumstances. Following defaults, borrowers must re-establish a positive payment background.
A single late payment will not automatically disqualify you, but you should not have made more than one late payment in the previous 12 months on any of your accounts.
No Credit History
If you have no financial history, mortgage lenders may request alternate credit lines, such as rent and phone payments, in order to create a positive payment history.
For a foreclosure, there is a 36-month delay time. In extenuating conditions, certain applicants will be able to apply in as little as 12 months.