Credit Score Requirements Going UP!

If you have lower credit scores, or you’ve had some credit issues in the past and now you’re recovering – you might be scouring the internet to find out what the Minimum Credit Scores for a Mortgage are in 2013…  

Let me start off by saying that We CAN make loans for folks who have two credit scores between 580 and 619 – however, those loans are being made to a VERY narrow group of people – and if you read our wording here (and there) you’ll understand that in many cases, we are probably better off helping you get a higher credit score.

In those cases where we  CAN make a loan with a 580 middle credit score – it’s going to be a FHA Home Loan, with many restrictions.  If the page you are reading on the Internet says that the guidelines for FHA state that you EASILY can do a 580 credit score loan, or that FHA will approve a mortgage when you are still in Bankruptcy – go to another page.  

FHA doesn’t approve loans.  They Insure Mortgage Loans.  That’s why they charge FHA PMI – so the FHA Eligibility Guidelines for minimum credit scores are just a way of them saying, here’s what we will insure… that doesn’t mean that you will  find a lender that will  go exactly by the guidelines, most will NOT.  Banks add their OWN guidelines to the FHA Underwriting guidelines.

The TRUTH is that minimum credit score requirements have gone up, and there are good reasons why even if the FHA guidelines SAY you can qualify for them to insure a loan with credit scores below 620 – you will have a VERY VERY VERY VERY VERY VERY (get the picture) hard time actually closing on a loan with scores below that mark. I guess this is my “buyer’s beware” clause.  It’s not an easy process.

The better thing to do is to figure out how to fix your credit (usually it’s pretty easy) and understand WHY it’s so hard to get a loan with 2 scores that are under 620.  Again – many lenders in NC are telling folks the benchmark is 640 to be able to get a loan – we CAN pretty easily do a loan if you have two scores over 620.

Okay – so I’ve re-read this whole post a couple of times – and it sounds kinda’ negative.  Not my goal!  See that picture? We have seen SOOOOO many people in North Carolina figure out how to get past all of the bad junk that’s been holding them back – we KNOW you can buy a house, it’s just a matter of time.

My point with all of this is just to help you understand how things really work right NOW in 2015, not to waste your time telling you junk that just really won’t work out – we WANT You to buy a house in North Carolina, and we want to help you!

The actual facts about Minimum Credit Scores for a Mortgage in 2015:

Fannie Mae and Freddie Mac (and therefore Ginnie Mae) changed their “Computer Program” to reflect a new minimum credit score requirement for mortgages.

The Official Automated Underwriting Systems for Fannie and Freddie will no longer  approve a home loan in NC with a middle credit score below 620. 

Earlier this spring, another program made a requirement for higher credit scores.  The NCHFA / First Time Home Buyer Program for NC now requires a 640 minimum credit score.  You do NOT have to be a First Time Buyer to qualify for the program – anyone who lives in NC, makes less than $87,500 a year and has not owned a home as a principal residence for the last 3 years qualifies. This program offers a 3% down payment assistance, and a mortgage tax credit!

This is SIGNIFICANT because VA Mortgage Loans, FHA Mortgage Loans and USDA Rural Development loan guidelines indicate that the Government will insure loans with scores substantially lower than this… however, if a loan is approved lower than 620, it can not be sold through Fannie Mae or Freddie Mac.

This means that it’s harder for lenders to make loans where minimum credit scores for a mortgage are below 620, because they need the ability to sell the loan if times change!

If you’ve had a foreclosure, short sale or a NON Government Backed Loan that went into foreclosure as part of a Bankruptcy, you will be required to wait before buying another home.

For a USDA Home Loan (again, assuming you did not get into a foreclosure or deed in lieu on a FHA, VA or USDA loan) then you will wait three full years from the date the property traded ownership at the Court House.

This date could be DIFFERENT from the date that it was made official – because some banks got so backed up they didn’t actually do the official paperwork transferring title for another 6 months! In that case – you would have to wait (theoretically) 3.5 years to buy again.  Bottom line?  In North Carolina, the USDA Home Loan waiting period after a Short Sale is 36 months from the date of transfer.

If USDA had the mortgage insurance on the home that went into the foreclosure or short sale – then it’s unlikely they will give you another USDA home Loan.  

The FHA Home Loan NC program just came out with a new ruling, and in a situation where someone has negative credit as a direct result of a job loss, they will allow you to buy a home 12 months after the event (foreclosure, bankruptcy, short sale).  But again – there are some pretty SPECIFIC items that must be documented, and you MUST fall within the parameters of the program.  They also require you to talk to a housing counselor 30 days prior to making loan application.

For all other VA home loans and FHA home loans you must wait a minimum of 20 months from the Discharge date.  In many cases a VA Home Loan underwriter will also want to see some savings in the back, and at least 2 open lines of credit with credit scores of at least 640.

If the home that you lost to foreclosure had a VA or FHA home loan on it, or if the VA or FHA took a loss on the property – it is unlikely they will extend you another home loan (unless you fall within that job loss situation). BUT – having said that – we’ve seen some pretty wacky things get approved – so CALL US, and we’ll let you know what we think the chances are 🙂

If you have questions about raising your credit score, or the minimum credit scores for a mortgage, please let us know how we can help. If you want to get pre-qualifed to buy a house, and find out what your credit scores are – please call Steve Thorne at 919-649-5058.