Texas Home Loans for Bad Credit: How to Use FHA Loans to Your Advantage

Published by admin at September 14, 2015

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The Federal Housing Administration is a government entity
that can help secure Texas Home Loans for bad credit borrowers. The government backed loans often offer bad
credit borrowers as well as first time home buyers a viable option to aid in
home ownership.

If you have bad credit, you have probably been turned away
by a bank if you applied for a home loan. You may think that owning a home is
impossible. However, there are a number of programs that can help you qualify
for a home loan. The best first step is to ditch the bank and find a company
that specializes in helping individuals and families figure out Texas home loan for bad credit. A
good first stop is a mortgage broker. Unlike a bank, the broker does not
actually loan out the money for a home loan. Instead he or she shops different
banks to help you find the best loan for your purchase and credit situation.
This allows more flexibility in terms of the types of loans that the broker can
find as well as lenders. A mortgage broker or mortgage company can act as your
intermediary and usually get you better loans and better terms than you could
get by going straight to a bank, especially if you have bad credit.

One loan type your broker will recommend is an FHA loan. An
FHA loan is a program for Texas home mortgages for bad credit borrowers. If you have bad credit, an FHA loan may
be a good option for you to secure a home loan. An FHA loan is a government
backed loan. Each month you pay extra insurance against default. The loan is
secured by the Federal government so lenders are more likely to give them to
borrowers with bad credit. In order to qualify for an FHA loan you will need to
have 3.5% of the purchase price to put down. You will also pay extra for
monthly mortgage insurance which can vary based on the amount of your loan. For
many bad credit borrowers an FHA loan is a good path for homeownership.

The Federal
Housing Administration does not give out loans. In order to obtain an FHA loan
you will need to find a mortgage broker, bank, or investment firm that is certified
to give out FHA loans. The FHA provides mortgage insurance to the lender on
their loans. This mortgage protects the lenders from losses due to homeowner
default. The lenders bear less risk because the FHA will pay an insurance claim
to the lender if the homeowner defaults on their loan the lender has to
foreclose on the property. This insurance makes and FHA loan a good program for
bad credit borrowers because a lender is more likely to make a loan to a
borrower with bad credit if they have FHA insurance.

History of the FHA and Its Role in Texas home mortgages for bad credit Borrowers

The
FHA was established in 1934 during the Great Depression. The goal of the agency
is to help all Americans purchase homes and to help stimulate the housing
economy. In the 1940s the FHA helped finance home loans for veterans and
military families. By the 1980s the FHA moved into falling home prices and made
it possible for home buyers to get financing during needed during the
recession. By 2001 homeownership in the United States was at a record high. The
FHA has insured over 34 million mortgages since its inception.

As illustrated above, the FHA has been in the home mortgage
business for over 80 years. It is completely self-funding and does not require
tax payer money or government bail outs. This makes it ideal for Texas home mortgages for bad credit because
lenders know and trust the agency. In addition, there are no surprises in terms
of interest rates like there are in adjustable rate mortgages. FHA loans offer
fixed interest rates for 15 to 30 years. However, keep in mind that you will
pay mortgage insurance each month. The amount of this payment varies depending
on the amount of your loan. You will pay this insurance until your loan to
value ratio is less than 80%. Meaning, you will have an extra monthly payment
until you have paid off 20% of your loan. If the value of your home increases
dramatically you can look into refinancing to eliminate this monthly payment.
In addition, there are certain mortgage arrangements that can be made during
your real estate negotiations to have the seller pay a portion of this
insurance upfront.

Talk with a mortgage
broker to determine if an FHA home loan is a good option for you.

The
Federal Housing Administration has helped many homeowners obtain loans they
otherwise may not qualify for. A mortgage broker can walk you through the
process of qualify for an FHA loan as well as describe any funds you may need.
Call a broker today to take the next steps to purchasing a home.