To buy a house, you will need three mortgage credit scores. A mortgage credit score is different than the score you pull from Credit Karma, or the score that Sears pulls when you apply for a credit card – or even the one that the Insurance Company pulls when you apply for any kind of Insurance.
In a few rare cases, for those who meet the Bank’s FHA Home Loan NC guidelines, we can get loans approved between 580 and 619. In general, however, to get a North Carolina Home Loan you will need credit scores over 640.
We do have investors we can sell loans to that will accept a 620, however, the terms are not as good. Because the Automated Underwriting Engines are pretty well focused on that 640 number, that’s what we will generally try to help you get to.
What this means, in easy to understand terms, is that you will need two of your three credit scores over the benchmark 640 number. Just having one credit score over 640 won’t work.
Additionally, if you are buying a house with a partner or spouse – the OTHER person needs two credit scores over the 640 mark too. Most Credit Reports that are “consumer” pulled (meaning you got it yourself) don’t have scores. And as I said before, even if you are seeing a copy of your report someone else pulled – it will be a different scoring model if you didn’t get it from a Mortgage Loan Officer.
So let’s say you’ve gotten your credit report – and you can’t you tell if it’s good… or on the edge??
1. Look at the payment histories. Some parts of your bill-paying history are more important than others, different pieces of your credit history are given different weights in calculating your credit score – but the payment history is 35% of that weight. Logic would say that the MOST IMPORTANT PART of your credit score is the answer to this question – “DO YOU PAY YOUR BILLS ON TIME??”
2. Figure out how much you owe versus how much your credit limits are. If you have three credit cards with a possible combined high balance of $3000, and you owe $2800 – your score is not as high as it could be. Maxed Out Credit Cards can KILL your Mortgage Credit Score. The ideal score will be given to you if your balance is less than 30% of the total high balances. Going back to that $3000 – your total balance on the three cards should be less than $1000.
3. Don’t close accounts. The length of credit history accounts for 15% of your favorable score.
4. Be careful about who you allow to pull your credit. If you are shopping for a car (for instance) and you go to 3 different lots – take your report with you instead of having each lot pull you credit. Inquires count for 10% of your score and affect your score for 12 months after it’s been pulled.
5. The mix of credit on your report also counts for 10%. We had a lower score a few years ago because our only credit was 6 mortgages (we owned rental property). The credit bureaus would rather see various mixes of credit on your report.
Once you’ve review it, Do not Dispute All of the bad stuff on your credit report. This is NOT going to help your scores – the Credit Bureaus know this is a scam, and it actually pulls your score DOWN.
give you solid advice on how to improve your score. If you are considering the purchase of a home – we can help! We close loans for folks every month who have been told they can’t buy a house! Call Steve and Eleanor Thorne, 919-649-5058
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