We are starting to see some creative loan programs come out to help out those that would otherwise be ineligible under many of the 2009 and 2010 FHA guidelines. For example, Wells Fargo has a brand new set of FHA products for 500-600 credit scores. Most other lenders only have products for those with 600-640 credit scores and up. The guidelines for these new products are a little more restrictive than a standard FHA loan but are still a welcome addition to the FHA loan portfolio. Most of the products for credit scores under 600 require a slightly larger down payment (5-10% instead of the standard 3.5%). The seller contribution on these loans are also limited to 3% of the purchase price instead of 6% for standard FHA loans and gift funds may not be used for the required 5-10% down payment, which is allowed in a traditional FHA loan. In addition, borrowers must also have at least two months of principal, interest, taxes and insurance in the bank and there are some restrictions on the loan to value and debt to income ratios.
There are several other programs out there to fit most needs. We still see 100% USDA, VA and Affordable Housing loans being made by certain lending institutions, most notably RBC Bank and Hometown Mortgage. Both companies have in-house underwriting which really help make the process smooth and easy. Many of RBC Bank's loans also have no PMI on some of their 97-100% loan programs.
Please do not hesitate to call or email me in order if you would like more information about these lenders or loan programs, or for any of your real estate needs. And, as always, your referrals are always greatly appreciated.