Credit Scores and First Time Home Buyers!

How Credit Scores are calculated is changing, and the minimum scores required for mortgage loans are going HIGHER!  It’s important to know that Trans Union began making changes to the way they calculate credit scores, and if you don’t change your credit strategy – you might not be able to purchase!

North Carolina First Time Home Buyers need to know what credit scores they need so that they can take advantage of the Mortgage Tax Credit.  The NCHFA Mortgage programs, which offer 3% down payment assistant Grants, MCC Credits and below market Interest rates – now require a minimum credit score of 640.

If you are using VA Benefits, you need a 620 score, even though VA does not have a MINIMUM credit score!  If a Veteran has at least two credit scores, even if they don’t have current open credit lines – they can use alternative forms of credit, like phone bills to show that they are a good credit risk.

USDA Home Loans are probably the most “forgiving” on credit requirements, but you still need to have at least two of your scores over 620.  Even with that, it’s VERY difficult to get a USDA Loan in North Carolina without at LEAST a Credit Score of 640!

If you are purchasing a home in North Carolina and want to use the FHA home loan program – you really do need 620 credit scores.  I know that there are people out there who are advertising that you can get a mortgage with a credit score lower than 620… but I’m telling you from my experience – those home loans are NOT CLOSING!

Again, despite what you might read about credit scores and First Time Home Buyers – we need at least 12 months without late payments, and we need to see a pattern that shows you know how to use credit!  Just paying off “bad” credit will not raise your scores enough!

Here are some of the biggest things First Time Home Buyers can do to raise Credit Scores:

• Do not pay off collections that are older than 24 months without speaking with a lender first.  It is possible that by paying off an old debt you will “revive” it and cause your score to go down.
• DO payoff anything that’s not medical related and over $100 on your credit report within the last 2 years.
• Make certain you have at LEAST 2 OPEN revolving accounts reporting to all three agencies showing on your credit report.
• Make certain you have at LEAST one OPEN installment debt reporting to all three agencies showing on your credit report.
• PAY YOUR BALANCES DOWN.  This is possibly the single biggest thing you can do!  I’ve seen this one thing increase a score 40 points!

If you are purchasing a home in North Carolina – and have questions about Credit Scores and First Time Home Buyers – what you need to do to qualify for a mortgage, please call Steve and Eleanor Thorne, North Carolina  Mortgage Experts 919-649-5058  Connect With Us on Facebook