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Possibility of Buying a House with 580 Credit Score in Houston

Does having a low credit score insinuate that one can never buy a house by getting a mortgage? Buying a house with a 580 credit score in Houston; is that impossible? Homebuyers have lots of such queries concerning owning a property. But having a low credit score can dampen your plans of owning your dream house unless you know all about the alternatives. 

First let’s try to understand, what leads to a bad credit score. A credit score of 580 falls between fair and poor, neither of which can get you a mortgage the conventional way of going to a bank. Traditional financial institutions show reluctance in approving house loans to people with poor credit scores. In that case, one has to see out the alternatives like government loans and private lenders. Let’s explore the available options.

Applying for FHA Loans

The FHA or Federal Housing Administration offers mortgage loans to low-income individuals, the ones with a poor credit score ranging between 500 and 580. Only an FHA-approved lender can dispense the money against the loan application. With a credit score of 580, you would have to make a minimum down payment of 3.5%. 

If the credit score is 500 then the down payment goes up to 10%. To avail, the first one would have to get in touch with an FHA lender. Once you find the right lender, you can further negotiate the terms of the mortgage since it is not set in stone that the FHA loan provider would have to follow the rules by the book. It is easy to qualify and get approved for an FHA loan and the best part is you can use gift money for a 100% down payment provided you can furnish the required details. 

Applying for VA Loans

There is another way that a person with a bad credit score up to 580 can get a house loan; by applying for VA loans. You can apply for VA loans if you are a veteran or in active military service. Spouses of the surviving military can apply for these loans as well. This too is a government-backed loan that was brought into effect to help the people on service and their families to buy a house and live peacefully. 

There are terms and conditions, such as the house having to be the primary residence. The benefits include 0% down payment and zero requirements of PMI. One can even qualify with no credit score.

So, to answer the initial question, yesbuying a house with a 580 credit score in Houston is possible, provided you get connected to the right lender eligible to offer you FHA and VA loans. 

Joan Galardo

author

Residential Commercial Mortgage Loan Originator at Clear Lending.

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