Minimum Credit Scores for Mortgages in 2012

I’ve written a couple dozen times about minimum credit scores for mortgages 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 620 – however, there are MANY “overlays” to getting an approval at that lower score.  FHA requires a 3.5% down payment that can be a gift.  The State of North Carolina is also offering a 3% 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 640, 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 620+ 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.

Have more specific questions about Minimum Credit Scores for Mortgages in NC?  You can always call us!

So the moral of this story??  You need to PLAN to purchase a home!  PLAN on speaking with Steve and Eleanor Thorne at NC Mortgage Expert in Cary919-649-5058. ( I thought that was kinda’ cute!)