For the past couple of years, when we talk to a borrower with a credit score of 580 to 600 – we told them they had a 3 to 4 month waiting period before they could buy a house. In MOST cases, that was all the time we need to help someone who is motivated, and who can really afford a home, to get their credit scores in order.
We are one of the few Banks that offers the FHA Home Loan NC Program to those who have minimum credit scores under 600. It has an additional set of added Bank restrictions, however, we can do mortgage loans for folks who have credit scores between 580 and 619.
If you have credit scores that are between 619 and 639, we have MORE options, including USDA Home Loans NC and VA Home Loans, with fewer restrictions for qualifying for a FHA Mortgage Program too! This is why we generally try to get folks up to the 620 minimum credit score benchmark.
On May 1, 2013 the First Time Home Buyer Program in NC changed it’s minimum credit score requirements. Not only did the NCHFA First Time Home Buyer Program change it”s minimum credit score – the other changes include more flexibility for home ownership status, Mortgage Tax Credits, and a better down payment grant for first time home buyers, which includes a closing cost assistance program.
Additionally, changes were made in April to the Automated Underwriting Systems for Fannie and Freddie – with those updates, Credit Score requirements for Government insured loans through the Fannie and Freddie system went up to 640.
Can Underwriters override the “Automated” Approval systems? Yes. There are situations where the Underwriter is being TOLD to overwrite the Automated Systems. In fact, FHA Home Loans NC just came out with a program designed to HELP folks who had a credit problem due to a job loss, reducing the time you must wait to buy a house to only 12 months.
Minimum Credit Scores for Mortgages
The USDA Home Loan Automated Underwriting System now looks for a 640 credit score. Most FHA Mortgage Loan Underwriters and VA Loan Underwriters want A 640 Credit Score Too.
Are there situations where someone with a score under 640 can get a mortgage? Sure – but for 75% of the folks we talk to, we just have to work to get those scores up to the 640 mark. We do offer the USDA Home Loan Program for folks with a 620 credit score. With that approval, we’ve found that you need to be well within the Debt to Income Ratios for a USDA Home Loan NC Underwriter to approve it.
We can also do FHA Home Loans and Veteran Home Loans down to the 620 minimum credit score mark too. VA Loans don’t really have a set minimum credit score requirement, but most VA Loan underwriters want to see 3 credit scores, with some “open” trade lines, and clean credit (no late payments) for at least the last 12 months.
If you need to just get your scores up, it’s work… I’m not going to sugar coat it. It’s like being on a Diet to lose 40 pounds. It takes commitment and determination. BUT, just like losing that 40 pounds – we all know it CAN be done!
With the USDA Maps changing in October, many people are interested in getting into a home that is closer to their job NOW. Remember that your Credit Score is simply a reflection of what you’ve RECENTLY done with your credit… so the OLD STUFF is not what is likely to be pulling your score down as much as the fact that you don’t have MUCH being reported that is CURRENTLY good.
If you have a score of 600, or higher here are the steps we suggest you take NOW:
- Look at your credit report, if you don’t have on you can get it through Credit Karma
- If you have deferred Student Loans, see what kind of arrangements you can make to actually get a set payment amount.
- If you have revolving credit, start paying the balance on those credit cards down to $10. Yes, I mean $10. Not OFF – just down to $10.
- Charge something, a tank of Gas, lunch, whatever, charge something on the credit card each month – then pay it down to $10. YES that means you will have some interest that you are paying on a monthly basis, but that interest (small amount) will help you get a higher score.
- If you don’t have a credit card – get 2 or 3 secured credit cards TODAY. Go to the Bank at Walmart, look on Credit Karma – you need 2 or 3 revolving accounts.
- If you have a family member with GOOD credit, and they will add you to a credit card that was opened AFTER you turned 18, ask them to add you as an authorized user. That GOOD credit History will help raise your score. Make sure that the balance on the credit card they add you to is no more than 30% of the credit line. If they add you to a card that is maxed out – you will see ZERO benefit.
What To Do About Collection Accounts
- DO NOT DISPUTE EVERYTHING YOU SEE ON YOUR ACCOUNT. The Credit Score models will actually LOWER your Credit scores if you do this. Just don’t do that.
- If you have small medical collections, look at the FIRST DATE it was reported. It’s going to be on your report for 7 years. If it’s been 2 years or more since it was originally placed on the account leave it. If the underwriters require these accounts to be paid, we can tell you that when you call or apply for a mortgage.
- If the collection is small – and it’s RECENT, like within in the last 6 months – you might want to set up a $10 or $15 a month payment plan. Once you’ve made 6 months of payments on time, the underwriter will consider that an installment account just like a car payment. Most people can qualify with a $15 a month payment to the hospital.
- If the collection is from Verizon, or a previously landlord – pay it. They may stop reporting if you pay it – I would certainly try and make that part of my deal for paying off a collection.
- Don’t let ANY NEW collections get added to your credit report! Send whoever you owe $30, do something – just don’t get NEW collections added to your credit report. They will KILL all of your efforts to clean everything up!
NCHFA Agency First Time Home Buyer Grant Program Changes 2013
- The NCHFA First Time Home Buyer Grant program now requires a 640 credit score.
- You DO NOT have to be a First Time Home Buyer to Qualify for the Program!
- The program now grants up to 3% of the Sales Price.
- Annual Borrower income must be less than $85,000 – they are not looking at the income of folks who live in your home but are not on the mortgage loan.
- The 3% is Interest Free, and Deferred, meaning you don’t have to make payments on it.
- The 3% is Forgivable! The 3% that you have as a second mortgage on the home is reduced by 20% per year after you remain in the home for 10 years with it considered paid off after you live in the home for 15 years.
- Program still works with USDA, FHA and VA loans
Higher Credit Score Requirements are Part of a National Trend!
Mortgage Loan Applications for home buyers with credit scores below 620 mostly disappeared in recent years, according to an interview recently with a member of the Board of Governors for the Federal Reserve System.
Before the Mortgage Meltdown, home buyers with lower credit scores made up a big part of the overall first time home buyer market in NC.
Between 2007 and 2012, a study just released shows that home buyers with credit scores between 620 and 680 went down nearly 90%, compared to a 30% drop for borrowers with a credit score greater than 780.
Meanwhile, the average credit scores for those applying for a mortgage loan went from 730 in 2007 to a whopping 770 in 2013 – as home buyers, especially first time home buyers felt that underwriting guidelines were so tight, that it was impossible to buy a house.
With few options available, most of the home buyers we work with are looking for a mortgage that is guaranteed by the Federal Housing Administration (FHA Home Loans), the Department of Veteran Affairs (VA Home Loans) and the USDA Home Loan Rural Development Program (USDA Loans).
As a result, the share of purchase mortgages guaranteed or insured by the FHA, the VA, or the USDA Home Loan Program escalated from 5% in 2006 to more than 40% in 2011. The guidelines for these mortgage loans, again, generally require 2 credit scores over the 620 benchmark – with the BEST add on programs (like Down Payment Assistance Grants and Mortgage Tax Credits) reserved for those with higher scores. Folks with scores under 619, but higher than 580 CAN qualify for a FHA Home Loan, but those guidelines are fairly restrictive.
Want To Know Where To Start With Buying a Home In North Carolina?
As a First Time Home Buyer, especially, there are so many questions about HOW to buy a home, and the process for getting a mortgage loan approved. We are really pleased to be able to help people through the process of getting higher credit scores so that they can purchase a home. There are HUNDREDS of families working hard right now to make that happen! We are so happy when we all meet at the Closing Table and you get the keys to your dream home! #TotallyWorthIt!
We want to help you get into that NC Dream House! Remember – just like you can go on a diet – you can go on a plan to raise your scores and buy a home. The steps are literally right here on this page. Have specific questions about Minimum Credit Scores? Leave me a comment, below and I’ll try to answer them all.
If you have questions about pre-qualifying for a mortgage loan in North Carolina, or Minimum Credit Scores – please call us! Steve and Eleanor Thorne 919 649 5058. We know how to get borrowers in NC approved, we know what credit scores and reports the Underwriters will take. We’ll call you back, and if you need to add another credit card, or pay something off – we’ll work with you. Here’s some GOOD CREDIT Advice (and it’s FREE!)!
Nice job Eleanor!
Very good information. Thanks.
Hi Eleanor, I was laid off in 2008 which caused me to claim chapter 13 bankruptcy and also let my house go. I simply had no money. My chapter 13 bankruptcy just discharged in Dec 2013. However, I have done everything I can to get my credit scores up but when I ran FICO they are only 646 experian, 601 equifax,
569 transunion. I make over 150k a year but due to my credit score I feel stuck. We are moving into a rent to own situation below our means 143k house until we can qualify for a loan. Not sure I could qualify now. Any advice?
Thanks,
Michael
Michael, I’m sending you a private message – thanks for contacting us!
I would like your assistance in determining if I qualify for a USAD home loan.
We would love to help you qualify for a USDA Home Loans, please call us at 919 649 5058, we’ll be glad to help you with buying a home! Congratulations!
Eleanor,
My boyfriend and I are currently renting a home in Matthews, NC, but our lease is up October 31st, 2014. Thus we would like to go forth with the home buying process verse renting again, however have several set backs. His credit score is around 600 and mine is only 627. Income is not an issue, our combined gross income is $120,000 and we have savings for a downpayment, but we feel as though our income alone would not be enough to be approved for a NC FHA loan. In addition we also have two late rental payments in our current 24month rental agreement from two accidental situations. We are aware that this also could effect our ability to be approved for a FHA loan. Where do we go from here and is it possible and or realistic to get approved for a loan before our lease is up? Thanks for all your help!
Lindsey! Hey! Call us when you have a few minutes, our number is 919 649 5058. I assume you have already gotten a copy of your credit report, so have it handy when you call. Regarding the late payments – some landlords report late payments, others don’t. But you are allowed 2 in the past 24 months – but not more than that, to be approved for a NC FHA Loan.
Regarding credit scores – there are two things I would want to be certain you know. First, FHA will allow us to go down to a 600 credit score if there’s a reason it’s so low. For instance, if he just doesn’t have any credit. There are some pretty easy ways to solve that issue. Family can help here, and it might be that adding him to a credit card you already have will kick him up to another tier – making it easier to buy NOW.
It is realistic and possible to get a loan approved before your lease is up. MOST of the folks we talk to get the loan APPROVED, and then they go into a contract to buy a house. It makes you a much stronger buyer, and helps you in negotiations! So call us! 919 649 5058. We work with great Real Estate agents in your area! (I have family in Mint Hill, we are very familiar with that part of the world)
I have a credit score of 550. I have a 7,500 dp Value of the property is 49,995 in Greenville NC
Miguel – you will have some work to do on your credit scores, but this usually only takes a few months to get them up to what we need. The thing to remember about credit scores is that the old stuff is not likely hurting your scores, it’s usually a situation where folks don’t have any “Good News” coming onto their credit report. Alot of times we suggest that folks get a Secured Credit Card. You can get one at the Bank inside any Walmart.
I have a 586 594 credit score. Medical bills are hurting my credit score.
Medical Bills should not be TREMENDOUSLY bringing your score down. The scoring models were changed to take this into consideration. It is likely a shortage of recent GOOD revolving credit. You are so close – we strongly suggest that you look into Secured Credit cards. Within 6 months your scores will be much better.
Hi..I wanted to know if you can still get approved if you have had recent late payments. My situation is that My husband an I have been trying to buy a home for quite some time with no success. It all comes down to credit. I will do well for sometime and then an emergency situation occurs and we get behind and have to try to start over again. I wanted to apply for FHA. I am ware o f the general requirements but getting a lender to approve at a 580 score has been close to impossible. I can’t seem to get my credit score above the 580 even when I was paying on time. I have three lines of credit ..maxed out but plan to get them paid complete In Jan/Feb. Credit cards just recently had 30 day lates. I have a car payment made on time..As well as student loan thati is paid on time. I have some compensating factors:
Working on same job for 5 years..Annual income is S 30,000 without bonus..bonus average about $3,000 to $5,000 a year …Renting at same property management company for 12 -years..current residence since 2008..$3200 in 401k..$900 in stock..I currently a pay $895 for rent..looking for mortgage between $695 & $750..I just honestly don’t know what to do.Please, Please,Please help.Desperately asking for help!
I HAVE BEEN in your situation in my life. Its tough.
My husband and I both took 2nd jobs. I coupon shopped, did the entire Dave Ramsey Program, and finally had the savings set aside. It was NOT EASY – but it was worth the journey. All I can do is encourage you to keep trying… and to seek a financial adviser, or a system, like Financial Peace University, that can give you a road map.
Hi I’ve been workin on my credit the last few months and I’ve been using credit karma as a guide. At this point I know I was able to get my transunion score up to 636 and my equifax has dropped recently to 561 but I’m expecting that to come back up because I’ve paid off all collection accounts and requested removal from off my score. I don’t have a lot for a down payment but I know of some assistance programs . At this point I am wondering what type of loans could I qualify for? What type of down payment assistance could i receive if any and also what is a realistic time frame that I could expect to purchase? I’ve seen a few houses that I like but I was told I need to be approved for the amount first? I’m a first time buyer that resides in Wayne county and I’m willing to move to a more rural area if that would help me qualify for certain assistance programs but what can I do to get my credit to a 640 if needed or even get my home? I know I would prefer a fixed rate for 30 yrs but I’m not sure what’s the steps I need to take to get pre approved?
Chaniece, just give us a call 919 649 5058 – we’ll be glad to help!
I have filled out the online application for a home loan. My wife and I are looking to purchase a home very soon. we filed ch7 2 years ago in may. My credit score is around to 600 mark and taking steps to improve it. My wife’s score is slightly higher than mine in the 620 range. We are renting in Charlotte right now and as soon as our daughter graduates HS we plan on moving out of the Charlotte area closer to work in Lincoln county. We have found a property we both love, and it is a working tree farm. the only draw back is the home on the property is a manufactured home. I would like to know if I qualify for a USDA loan to purchase it.
Hi, Eleanor and Steve do you assist people in Cumberland County North Carolina? Primarily Fayetteville, NC!
We would love to help you and will reach out to you directly! Thanks!
I’m ready to buy a home and get out of the renting shin dig…however what kind of down money should be held and also with a 680 credit score what can be approved for
Hi Steve and Eleanor!
I found your page when looking for more information on USDA loans in North Carolina. I have been at my job for over two years and am salaried.Fiance is a freelance graphic designer, but not looking to have him on the loan…though I do know we need to report his earnings. Together, we are eligible with our incomes amounts, but not sure if my credit qualifies. I am around 41% utilization on my credit, have some student loans (around $12k total) that I am working on paying off each month. Have made on time payments for almost two years. I started rebuilding my credit a little over two years ago after falling into some financial trouble in college and charging off a credit card (around $1200 in 2015). Vantage scores are around 653-636, but it looks like my FICO sits around 622 (from Experian app). I have around $2k in my 401k and have been paying about $950 in rent for the past 2 years (on time ALWAYS! even during crisis). Do you think I could qualify for the Single Family Guaranteed Loan through USDA?
Liz – USDA Credit Score Guidelines have been getting tighter. You might be able to do a manually underwritten USDA loan. We would be glad to look at your file and give you a no obligation pre-qualification. You can call us at 919 649 5058 Thanks!!