Turning into a homeowner can be a daunting task. It is even financially overwhelming, too. Potential homebuyers can find mortgages and lenders easily with their high scores. However, it becomes difficult to find first time home buyer programs with low credit scores in Aurora. So, in this article, we mention the important pieces of information about the home buyer programs and homebuyers in Aurora.
FHA Loans for Low Credit Score Requirements
The Federal Housing Administration allows homebuyers to apply for a 3.5% down payment. Small down payments are important for people who do not have much savings. For this very reason, an FHA loan makes a widely popular choice among first-time homebuyers. 73% of U.S. borrowers tend to make down payments less than 10%. Many lenders do not add mortgage insurance premiums when homebuyers put down 10% of the loan. Well, you cannot apply for a 3.5% down payment when your credit score is slightly under 580.
FHA-approved lenders allow homebuyers who have at least 500 credit scores. Loan limits keep changing depending on your location. You may see the maximums ranging between $420,860 and $970,800 throughout this year.
Now, you need to remember that FHA lenders should allow a credit score of 500; however, this is not always the case. Lenders prefer borrowers with a higher score, and FICO scores in the 500s indicate more risks. Ideally, they want your credit scores to range around 678. Of course, mortgage insurance premiums must be paid upfront. You should talk to the lender about the additional costs and how much risk you bring to the table.
Tips for First-time Home Buyers with Low Credit Scores
During the evaluation of the home loan, lenders look beyond the credit scores. They thoroughly check your credit reports for getting a deep understanding of your financial health and payment habits. The credit report and credit scores are vital to understanding whether you can pass the eligibility. If your credit is on the positive side, you can expect a low loan rate.
Besides the credit scores, you should come up with a budget for the home loan. While you do, you should also make yourself debt-free. Shopping around for more options is another tip you can make use of.
In the end, you can always ask Clear Lending if you have queries about the first-time homebuyer programs available in your locality.
