We often talk to first time home buyers who want to know the minimum credit score requirements for a mortgage in North Carolina. The answer, while not complicated, is not one where I can just spit out ONE number as a benchmark for all mortgage programs.
The minimum credit score requirements for a mortgage depends on which type of program you are applying for, what type of housing you are purchasing, and what down payment you will be making.
Minimum Credit Score Requirements for a Mortgage
When we are talking about a minimum credit score for a home loan, we are really saying that of the three credit scores you have – two of the three must be at or over the minimum credit score requirement for that mortgage program.
Minimum Credit Score Requirements for Home Loans
Minimum Credit Score Requirements for FHA Loans:
FHA Loans are often considered First Time Home Buyer loans, although you do NOT have to be a first time home buyer to qualify for the loan. The minimum down payment for a FHA Loan is 3.5% and the FHA monthly PMI is .85%. No matter what your credit score is – you can will get today’s best mortgage rate for a FHA loan, and your PMI factor will not change.
With FHA Loans, you can have a non-owner occupied borrower added to the loan – however the co-signor does not offset bad credit, so the person who is living in the house needs good credit.
FHA Loans can also help in situations where one spouse has good credit and the other spouse has all of the income.
Folks with minimum credit scores between 580 and 619. If you have excellent offsetting, compensating factors, like extra funds left over after closing, and very low debt to income ratios, you can get a FHA loan with minimum credit scores below 620.
The maximum debt to income ratio for FHA Loans with scores between 580 and 619 is 43.0000%. For folks with this credit score profile, the Down Payment can NOT be a gift.
For MOST people, the Minimum credit score requirements for FHA Loans is 620. For these folks, you don’t need as many compensating factors. Maybe you have some unpaid medical collections on your credit report, or you are getting Gift Funds for your down payment – then the next minimum credit score we will try to get you approved at is 620.
The FHA Loan Automated Underwriting system is set to approve loans with a minimum credit score of 640. Those with scores below 640 will sometimes get an automatic approval through the system – but usually those will be Manual Underwrites, meaning you will have more documentation requirements.
FHA Home loans have a 24 month waiting period for most Bankruptcy situations – however those that involved a foreclosure have a waiting period of 36 months.
Minimum Credit Score Requirements for USDA Loans:
USDA Home Loans have no down payment requirements. The monthly USDA PMI rate going to be lower in October of 2016, at .35%, and does not go up if you have lower credit scores. This lower Mortgage Insurance, will make USDA Home Loans in NC the absolute best program when compared to Conventional Loans and FHA Mortgages.
There are two credit score thresholds for a USDA Home Loan NC approval. The Automated Underwriting system (GUS) is good at approving borrowers who have a credit score of 640 or higher.
For buyers with credit scores in the 600 – 639 range, GUS will not issue an approval, and those loans require Manual Underwriting.
That basically means that an Underwriter must have strong compensating factors, such as a lower debt ratio, in order to “justify” approving your loan outside of the GUS system. All USDA Home Loans (no matter what the credit score) must go to the USDA Office for approval.
This typically means this loan is a longer approval process. The waiting period to get a USDA Home Loan after a Bankruptcy or Foreclosure is 36 months from the date of the transfer, discharge.
Minimum Credit Score Requirements for VA Loans:
In the Fall of 2013, the Bank credit score requirements for a VA Home Loan went down. Earlier this year, we had trouble getting Veterans with minimum credit scores of 610 approved – that is no longer the case.
In 2016, VA Loans for Veterans who have a minimum credit score of 600 are getting approved. VA loans require no down payment for loans under $417,000. There’s a small down payment required for loans between 417,000 and the maximum of $625,000. VA Loans do not have any monthly PMI fees. It’s a great benefit for Veterans!
Waiting period for Veteran’s who have a Chapter 7 or Chapter 13 Bankruptcy in their past, experienced a foreclosure or Short Sale is generally two years.
We have seen a few situations where a Veteran who experienced a credit trauma that was completely out of their control be able to buy a house within 12 months of the crisis – however that is RARE.
Minimum Credit Score Requirements for Conventional Loans:
Qualifying for a Conventional Loan requires a 3% down payment.If you have at least a 640 credit score, you might be eligible for Down Payment Assistance, that will be forgiven after you live in the house for a set period of time – therefore we refer to these as Conventional Mortgage Grants.**
**A Quick Note
We refer to these programs as “mortgage grants” because there are no payments to be made, there is no interest charge, and there’s no expectation that you will have to repay ANY of the money you receive for down payment, unless you move out of the property or refinance prior to the dates assigned by your specific down payment assistance program.
The literal term for this down payment assistance program is a “forgivable loan.” Under the terms of the program that best suits you, a portion of this down payment assistance will be forgiven on a schedule that we will share with you when you make loan application. These funds are available to us through NC Housing (NCHFA) and are available through other lenders in the state as well. The interest rates for these programs, however, will not vary from lender to lender as that is set by NC Housing.
If you have a minimum credit score of at least 700, this is often the best program available for you because the PMI rates are lower than those of a FHA Home Loan.
The PMI rates for a Conventional Loan are tiered based upon your credit score – so the higher the credit score, the lower the mortgage interest rate, and the lower the PMI rate we can offer you.
We do not make mortgage loans on Manufactured houses in NC. If you are considering a Condominium, we need to talk with you about the Condo Approval issued on the Project before we can let you know what type of mortgage loan is going to work on the unit.
We are disclosing information here for the purchase of Owner Occupied Residence loans. Non-owner occupied properties, second homes and refinances do have separate minimum credit score requirements. For other types of loans, and their minimum credit score requirements, please call us at 919 649 5058
It’s important to remember that your credit score is just a snapshot of what your credit looks like at a given moment. What I’m trying to say is… If you don’t currently have the credit scores you need to buy a home in NC – don’t give up. ANYONE can increase their scores to be able to buy a home, and normally we can help someone do that in as little time as just a couple of months.
If you have questions about minimum credit score requirements for a mortgage, or want to know ways that you can RAISE your credit scores, you might want to read the section on this page about: If you have a credit score of 600, or higher here are the steps we suggest you take NOW.
Need specific information about your situation and Minimum Credit Score Requirements for a Mortgage, call Steve and Eleanor Thorne 919 649 5058. We work with people in NC every month who thought they would never be able to buy a house, and found that it was much easier than they thought!