What Is a Credit Score?
A credit score is a three-digit number (usually ranging from 300 to 850) that reflects how likely you are to repay borrowed money. Mortgage lenders rely heavily on your FICO score, which is calculated based on:
Payment history (35%) — Whether you pay bills on time.
Amounts owed / credit utilization (30%) — How much of your available credit you are using.
Length of credit history (15%) — How long your accounts have been open.
Credit mix (10%) — The variety of credit types you carry.
New credit inquiries (10%) — How many new accounts or applications you have recently opened.
The higher your score, the more likely you are to qualify for favorable loan terms and lower interest rates.
Minimum Credit Score by Loan Type
Every mortgage program has different requirements. Here is a quick reference for 2026:
Conventional loans: 620+ recommended. 3% to 20% down. Higher scores unlock better rates. As of November 2025, Fannie Mae and Freddie Mac eliminated the minimum credit score threshold in their conventional loan eligibility guidelines. Loan approval is now based on an evaluation of overall credit risk factors. However, most lenders still maintain their own internal minimums, typically 620 or higher.
FHA loans: 580+ with 3.5% down payment. Borrowers with scores between 500 and 579 may qualify with 10% down. FHA requires mortgage insurance for the life of the loan in most cases. For 2026, the FHA single-family loan limit in Wake, Johnston, and Harnett counties (covering all NHI submarket communities) is $541,287.
VA loans: No official minimum credit score, but most lenders look for 580 to 620. Zero down payment required. No monthly PMI.
USDA loans: 640+ recommended. Zero down payment. Income limits apply per county and state.
Jumbo loans: 680 to 700+ typically required. 10% to 20% down. Stricter requirements overall. The 2026 conforming loan limit for conventional loans is $832,750. Anything above that enters jumbo territory.
For a deeper comparison of FHA vs. conventional for new construction, read our guide: FHA Loans for New Homes.
2026 Policy Update: Fannie Mae and Freddie Mac Credit Score Change
As of November 2025, Fannie Mae and Freddie Mac eliminated the minimum credit score threshold for conventional loan eligibility guidelines. Loan approval is now based on an evaluation of overall credit risk factors rather than a hard numeric floor.
What does this mean for Raleigh-area buyers? In practice, the change is more policy than reality for most borrowers. The vast majority of lenders still maintain their own internal credit score minimums, typically 620 or higher for conventional loans. However, the shift signals that the lending industry is moving toward a more holistic evaluation of borrower risk, which may benefit buyers who have strong income and savings but a credit score that falls slightly below traditional thresholds.
If your score is in the 580 to 620 range, FHA loans remain the most accessible option with a 3.5% minimum down payment.
What Is Considered a Good Credit Score?
Here is how FICO generally categorizes credit scores:
Excellent: 800+
Very Good: 740 to 799
Good: 670 to 739
Fair: 580 to 669
Poor: Below 580
For homebuyers in Raleigh and across NC, a score of at least 660 usually positions you for competitive mortgage rates. Aiming for 720 or higher often unlocks the best financing options available. At current rates near 6.25% (Freddie Mac, March 2026), the difference between a 640 score and a 760 score on a $400,000 loan can add roughly $200 to $250 per month to your payment. Over 30 years, that is tens of thousands of dollars.
Credit Score Requirements in North Carolina
While national guidelines apply, North Carolina homebuyers also benefit from state-specific programs:
The NC Home Advantage Mortgage requires a minimum 640 score and offers up to 3% of the loan amount in down payment assistance as a zero-interest second mortgage forgiven after 15 years.
The NC 1st Home Advantage provides up to $15,000 in down payment assistance for first-time buyers and military veterans with a credit score of 640 or higher.
The NC Home Advantage Tax Credit provides a federal tax credit equal to 50% of your annual mortgage interest on a new home, up to $2,000 per year.
New Home Inc works with preferred lenders who can guide you through local mortgage requirements and these NC programs.
How to Improve Your Credit Score Before Buying a House
If your score is not where you want it to be, here are steps to raise it:
Pay bills on time. Even one late payment can drop your score significantly. Payment history is the single largest factor at 35% of your score.
Lower credit utilization. Aim to use less than 30% of your available credit. If your credit card has a $10,000 limit, keep your balance below $3,000.
Avoid new credit lines. Too many hard inquiries can hurt your score. Do not open new credit cards or take on new loans while you are preparing to buy a home.
Keep old accounts open. A longer credit history boosts your score. Even if you do not use an old credit card, keeping it open adds to your credit age.
Check your credit report for errors. Dispute any inaccuracies with the credit bureaus. You can get your free annual reports at AnnualCreditReport.com, the only site authorized by federal law.
With consistent effort, many buyers improve their scores within 6 to 12 months.
See How Your Score Affects Your Payment: Use our NHI Mortgage Calculator to estimate monthly payments and explore your buying power. A higher credit score means a lower rate, which directly increases how much home you can afford. Try running your numbers at different rate scenarios to see the difference.
Other Factors Lenders Consider Beyond Credit Score
Your credit score is not the only thing lenders review. They will also look at:
Debt-to-income ratio (DTI): Ideally under 43% for FHA loans, under 36% for conventional. DTI compares your total monthly debt payments to your gross monthly income.
Employment history: Steady income for 2 or more years is preferred. Lenders want to see that you can reliably make your mortgage payments.
Down payment: Larger down payments may offset a lower score and reduce your loan amount, monthly payment, and insurance costs.
Assets and reserves: Savings, retirement funds, or investments add security in the lender's eyes. Having three to six months of housing expenses in reserve is a strong signal.
Your Credit Score Is One Piece of the Puzzle
Understanding your credit is the first step. Here are the guides that cover every other piece of the home buying process:
How Much Mortgage Can I Afford in the Raleigh Area? — Understand the 28/36 rule and what Raleigh-area income levels can support.
How Much Do You Need for a Down Payment on a Home in NC? — Down payment requirements by loan type and NC assistance programs.
First-Time Homebuyer Tips — A 9-step guide for buyers in the Raleigh area.
Best Ways to Save for a Home Down Payment — Practical savings strategies with NC-specific targets.
FHA Loans for New Homes — How FHA works with new construction and NC programs.
The New Home Buying Process — Step-by-step from preapproval to closing.
FAQs About Credit Scores and Homebuying
Can I get a mortgage with a 500 credit score? Possibly, with FHA financing and a 10% down payment. Options are limited at this score level, and interest rates will be significantly higher. Most buyers benefit from spending 6 to 12 months improving their score before applying.
Does a higher credit score always mean a lower interest rate? Not always. Market rates, loan type, and lender policies also play a role. But higher scores almost always qualify you for the best rates available at any given time, which directly affects your monthly payment and total cost over the life of the loan.
How long does it take to improve a credit score? It depends on your starting point and the specific issues affecting your score. Paying down credit card balances and correcting errors can show results within 30 to 60 days. Building a longer, cleaner history takes 6 to 12 months. The key is consistency.
Will checking my own credit score hurt it? No. Checking your own score is a "soft inquiry" and does not affect your credit. Only "hard inquiries" from lenders when you formally apply for credit can impact your score, and even then the effect is small and temporary.
Ready to Start Your Home Search?
Your credit score is the key that opens the door to mortgage options. Once you know where you stand, the next step is exploring what is available in your price range.
Start with our NHI Mortgage Calculator to see how your score translates to buying power. Then explore new homes in Raleigh NC to browse all NHI communities and floor plans.
Looking at specific areas? Check out new homes in Clayton NC, new homes in Fuquay-Varina NC, new homes in Lillington NC, new homes in Wendell NC, new homes in Zebulon NC, or new homes in Willow Spring NC.
NHI works with preferred lenders who understand new home construction Raleigh NC financing and can help buyers at every credit level find the right loan program.
Contact us and we will connect you with a lender who can review your credit profile and walk you through your options.
