New Minimum Credit Scores for Conforming Mortgage Loans

Effective immediately, borrowers with weak credit will need down payments or equity in their homes. All mortgage loans higher than 80% of the property value (less than 20% down payment or 20% equity) will require a 620 credit score. Anyone seeking a 95% loan or higher will required to have a credit score of 680 or better. This is the result of changes implemented by the private mortgage insurance companies that insure conforming mortgage loans. This affects all Fannie Mae and Freddie Mac mortgage products.

For the time being, FHA mortgage loans still do not have minimum credit scores… HOWEVER, many lenders have chosen to impose their own minimum score requirements. In many cases, lenders are seeking a minimum credit score of 580 for an FHA mortgage loan. This is good news for many still looking to buy a home or refinance their higher rate mortgage loans.

With these changes, we may see a comeback of the “subprime” market, but do not expect the types of loans we saw 2 years ago. If and when the subprime market begins to return, they may allow lower scores, but will require money down (or equity) along with a higher mortgage rate.

If you are considering buying a home in Charlotte, or refinancing your exisiting Charlotte mortgage, you need to speak to a mortgage professional right away. You can get qualified and find out where you stand. If you do not qualify today, you may discover what you need to correct in order to qualify tomorrow.