Improve Your Score 50 Points – NOW!

February 7, 2012 by Leave a Comment

credit_issuesWe’ve written many times here about writing dispute letters when you have incorrect items on your report.  In addition to this, you could improve your score by 50 points if you would do the following:

  • Pay off any verified bad credit item on your report. In exchange for your payment have the lender remove the item from your credit report.  This works especially well if you have medical collections… once the collection is sold multiple times, it shows on your credit report multiple times, so get it off!
  • Pay your bills on time. It is alleged that missing one monthly payment can cause your score to drop by up to 50 points. We tell folks that they should be able to purchase a home if they have 12 months of ON TIME payments!
  • Open a new line of credit. You will get the most benefit if this is a revolving line of credit. We recommend an unsecured credit card… but if you must use a secured card – do it! But, make sure it reports to all 3 bureaus.
  • Pay your large debts down. This is called your available credit to debt. The bureaus need to see that you are not in over you head and that you do have credit that is not being used.

These four action items are the only things you need to concern yourself with when trying to improve your FICO credit score.  The minimum credit score for most loan programs is 640, however, you CAN buy a home with a credit score of 600!.  If you have a score in the high 500′s to low 600′s, and want to buy a home – we might be able to help!  Call Steve Thorne 919-694-5058

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Minimum Credit Scores for Mortgages in 2012

January 25, 2012 by 11 Comments

I”ve written a couple dozen times about scores and how to increase your score – but I don’t think I’ve mentioned (here anyway) what the goal is.  If you want to buy a car – your goal is to get your score to AT LEAST a 525 on all three credit bureaus.  If you are purchasing a home… the bar’s a little higher.

  • Most FHA underwriters now require a minimum score of 620.  We offer the FHA Affordable Program that will approve FHA Mortgage Loans at a minimum credit score of 600 – however, there are MANY “overlays” to getting an approval at that lower score.  FHA requires a 3.5% downpayment that can be a gift.  The State of North Carolina is also offering a $8000 DownPayment Assistance Program to those who qualify.  It’s a little tricky to coordinate – so if you have a score that you think will meet the 600, and you’re going to need that extra help with the downpayment – DEFINITELY call us prior to looking for houses!  (In Wake County the maximum FHA loan is $295k click here to see limits for other counties)
  • Veteran Home Loans don’t have a minimum credit score requirement.  However, most of the underwriters will require a minimum of 620… (although lately I’ve seen some 620′s that wouldn’t work).  We think the “black box” automated underwriting system is getting a little tighter – so you definitely want us to have a peek at your credit prior to looking for a home!  In the Triangle – we’ve partnered with a builder and several other service providers to offer SUBSTANTIAL discounts on homes and the closing costs to Veterans and their families.   Please remember to ask us about this!  (the maximum VA home loan is well over $400K… however with the number of reservist we’ve talked to lately – our stance is that we will need to look at your particular eligibility status to determine your maximum 100% loan).
  • USDA  home loans are for properties in less populated areas.  They had been the “go to” if your score was between 580 and 600.  That loophole is closing and they are really looking for 600+ now.  In fact, if you have less than a 640, it’s a required Manual Underwrite, and the guidelines are very, very specific (tight).  There’s no maximum loan – it depends on what you can qualify for.
  • The Conventional loan products and the PMI standards have also gone up.  To OVER SIMPLIFY… you can get a loan if your score is between 660 and 680 – but it’s not easy and the PMI costs are awful.  You really need a score of 720 and at least 5% to put down to get today’s best offerings.  The GOOD NEWS is that if you have a 660 score – getting to 720 is really not that difficult – it’s just a matter of taking the 30 or 45 days to do it.

If you’ve previously had a bankruptcy, foreclosure or Short Sale – it’s important to also look at how long you need to wait before you can purchase another home, no matter what your credit score is.

So the moral of this story??  You need to PLAN to purchase a home!  PLAN on speaking with Steve and Eleanor Thorne at Mortgage Banker in Cary 919-649-5058. ( I thought that was kinda’ cute!)

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