VLB | Interest Rate

VLB | Interest Rate

Mortgage Loan with a 500 Credit Score? It's Possible!

According to a number of Wells Fargo Home Mortgage originators, Wells Fargo will now allow an FHA borrower to get a mortgage with a credit score of less than 600.

In exchange for a larger down payment and a lower overall debt load (lower Debt-To-Income ratios), Wells Fargo Home Mortgage currently allows borrowers to take out an FHA loan on a purchase transaction with a minimum credit score as low as 500.

Here are the details as I understand them:

The credit policy change was posted to Wells Fargo Home Mortgage originators on January 14, 2011 and takes effect for purchase transactions using an FHA loan on or after January 15. The new policy will allow minimum loan scores and loan to value ratios as follows:

• A score of < 500 = not allowed
• 500 to 579 = 10% minimum down payment (90% Max LTV) PLUS "additional requirements"
• 580 to 599 = 5% minimum down payment (95% Max LTV) PLUS "additional requirements"
• 600+ = 3.5% minimum down payment

The "additional requirements" for all borrowers with FICO scores < 600 are:

1. Lower Debt to Income Ratios. These could be as low as 31% for housing debt and 36% for TOTAL debt.
2. 2 full months of "reserves" are required (cash in their bank account AFTER paying down payment and closing costs). The reserves are calculated on the total housing payment, in other words Principal, Interest, Taxes and Insurance (PITI)
3. Seller contributions may not exceed 3% of the purchase price
4. Gift funds are not allowed to count toward the down payment requirement (for any borrower with a score less than 600)
5. Down payment Assistance Programs are not allowed to count toward the down payment requirement (for any borrower with a score less than 600)

The borrower must also be able to document that they accumulated the required down payment funds and that they did not come from a gift or from a DAP. They must prove they had the ability to accumulate the funds and documentation proving how they came to accumulate the funds needs to be included in the loan file.

A few final details:

• This is for purchase transactions only.
• This is only CURRENTLY available ONLY from a Wells Fargo Home Mortgage RETAIL lender.
• Pricing adjustments will still be made to the rate. In other words, the lower the credit score, the higher the interest rate will be. You will not be offered the best rate with a low credit score.

Call me for more details !

 

 

Posted via email from TexasHomesDuo's Exit Realty NW San Antonio posterous