Special offer

Lenders are starting to loosen up!

By
Real Estate Broker/Owner with Advantage Realty Group

Good news for some buyers! Wells Fargo, the largest originator of FHA mortgages has loosened up a bit & recently revised credit & down payment requirements. Wells will now lend to applicants with FICO scores as low as 600 and 3.5% down payments ( can be gift funds).

Previously, if your score came in even slightly lower, they wouldn't even look at your application. How big a news is this for buyers AND sellers who need qualified buyers in the market? An estimated 1/3 of Americans now have FICO scores below 620, according to one consumer group's estimate. 

What about borrowers with lower scores? There are options available:

  • 580-599 - 5% down - no gift funds.
  • 500-579 - 10% down - no gift funds.

Sellers can contribute up to 3% toward buyer closings & loan costs.

 There are tight debt ratio requirements: Mortgage payment must be below 31% of income & total debt must be below 43% of income. 

The idea is to provide homeownership opportunities to genuinely qualified buyers who simply have temporarily depressed credit scores. 

Bravo!

 

Dennis Duvernay Broker/Owner
Hillview Realty - Northbridge, MA

Rich ...hopefully this will help some buyers who were borderline before....no we don't want to go back to the way things were that got us into this crazy mess but lenders have to be a little more open....

Feb 12, 2011 07:21 AM
Rich Sossa
Advantage Realty Group - Huntersville, NC
CRS, GRI, ABR, SFR, CDPE

Yes, I agree. There are many folks with 580 scores who have solid incomes and generally good credit histories. Their current scores may be depressed because they went through the recession and suffered some damage such as short-term loss of income which may have caused them to be late on some payments.

A person could have years of solid credit history but then suffer a hiccup in the last year or two causing a detrimental effect on their credit scores.  

We need lenders who can take a look at a persons history, look hard at the causes of their problems and underwrite carefully. Credit score alone does not tell the whole picture. Wells has taken a step in the right direction & undoubtedly others will follow suit.

A person could lose his job in one city, get behind on some payments, then relocate to another city with a new job. Up until now his family would be forced to rent a home in his new city. Now, maybe, this person can qualify for a mortgage which is good news for a seller and the whole real estate market!

Feb 13, 2011 01:06 AM