Credit Scores and Mortgages

I”ve written a couple dozen times about scores 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.

• FHA loans require a minimum score of 580.  Effective July 14, 2008 FHA will be moving to a “risk based” mortgage insurance program (UFMIP) that will charge borrowers 2.25% (or more) upfront.  This is tacked onto the loan.  Then there’s a monthly fee.  The higher your score – the better the terms for mortgage insurance.  These loans can currently be 100% loans with a DownPayment Assistance Program.  It’s a little tricky to coordinate – so if you have a score that you think will meet the 580, and you’re going to need that extra help with the downpayment – DEFINATELY call us prior to looking for houses!  (In Wake County the maximum FHA loan is $295k click here to see limits for other counties)
• VA loans require a minimum of 580… although lately I’ve seen some 580’s that wouldn’t work.  We think the “black box” automated underwriting system is getting a little tighter – so you definately 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 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 loans are for properties in less populated areas.  They had been the “go to” if your score was between 550 and 580.  That loophole is closing and they are really looking for 580 now.  There’s no maximum loan – it depends on what you can qualify for.
• The Conventional loan products and the PMI standards are going up again on July 1st.  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.

So the moral of this story??  You need to PLAN to purchase a home!  PLAN on speaking with Steve and Eleanor Thorne at Meridian Residential 919-459-1313. ( I thought that was kinda’ cute!)