Private lenders, such as Rock Mortgage, can issue an FHA Loan Houston to qualified buyers who may have difficulty getting a mortgage. FHA loans’ biggest benefits are that they are easier to qualify for and have lower down payment requirements than conventional loans. Yet, there are still credit requirements. Recent rule changes have made FHA loans more difficult to get for buyers with poor credit.
What is an FHA loan: An FHA loan, also known as a Federal Housing Administration loan, is a mortgage insured by the FHA, which is a government agency within the United States Department of Housing and Urban Development (HUD). FHA loans are designed to help individuals with lower income or credit scores to become homeowners by providing more flexible qualification criteria and lower down payment requirements.
FHA Loan Houston Requirements
When applying for a mortgage loan, such as an FHA loan, credit history and credit score are indeed crucial factors that lenders consider to determine eligibility. A strong credit history and a good credit score demonstrate your ability to manage debt and make timely payments, which are indicators of your likelihood to repay the loan. However, mortgage lenders in Houston, like elsewhere, take into account other factors as well.
Credit History and Credit Score
To qualify for FHA loans Houston with a down payment of 3.5%, buyers must have 580 or higher credit scores. Buyers with credit scores below 580 may still qualify but will need a down payment of 10% of the sale price. Buyers with credit scores below 580 should consider whether it is better to get a loan with a higher down payment or wait. It may make sense for some buyers to use that money to pay down their debts and improve their credit instead.
Buyers who can afford to make a higher down payment than what the lender requires should consider doing so. A higher downpayment reduces the total amount borrowed. This will make monthly payments more affordable and decrease the cost of the loan.
Borrowers who have filed for a Chapter 7 bankruptcy may be eligible if at least two years have passed since the date their debts were discharged. By contrast, applicants who have filed a Chapter 13 bankruptcy who have received the court’s trustee’s approval may be extended a loan, even if proceedings are still taking place. However, all applicants who have filed bankruptcy must submit a complete bankruptcy explanation with their application.
Buyers must demonstrate they can meet their monthly financial obligations based on their debt-to-income ratio. The standard FHA debt to income ratio requirement is 31/43. This means that the home you are trying to finance should not cost more than 31% of your gross income, and all of your debt should not total more than 43% of your gross income. Ideally, borrowers should aim for a 28/36 ratio or better. The amount of money available to borrowers may depend on local housing prices.
Benefits of an FHA Loan Houston
Because the Federal Housing Administration insures FHA loans Houston, mortgage lenders Houston are willing to take a chance on borrowers who may not qualify for conventional mortgages. These loans are popular with buyers because of the benefits they provide.
FHA Loans Houston Are Easier To Qualify For
Borrowers with poor history and low credit scores often can not qualify for conventional mortgages. FHA loans Houston make it possible for these borrowers to become homeowners.
Borrowers With No Credit Can Qualify
Most borrowers are required to have two lines of credit to obtain a mortgage backed by the FHA. However, some borrowers with no credit may be able to qualify through a substitute form.
Lower Interest Rates and Fees
Many subprime mortgage lenders Houston charge interest rates that result in foreclosures for borrowers with poor credit. Rock Morgage offers FHA loans Houston at much more competitive rates than those provided by subprime lenders. Additionally, borrowers can expect to pay less for closing costs, mortgage insurance, and other fees.
People Who Have Filed Bankruptcy or Been Foreclosed on May Still Qualify
Most mortgage lenders Houston will not offer a conventional loan to borrowers who still have bankruptcies on their credit reports or have had a home foreclosed. However, applicants who have established a good recent credit and payment history and meet the other requirements may be able to qualify for FHA loans Houston, even if they have had a bankruptcy or foreclosure in the past.
These benefits make an FHA loan an attractive option for first-time homebuyers, buyers with poor credit, and lower incomes. However, anyone who can meet the qualifications can apply for an FHA loan Houston with Rock Mortgage.
Get in Touch Today
The team at Rock Mortgage is always here to help. If you have questions about qualifying for an FHA loan Houston or would like to begin the application process, call us at (832) 230-3067 or contact us online. Our professionals are ready to help you get the home financing you need.
Credit Requirements for an FHA Loan in 2021 | Rock Mortgage — Houston, Texas