Wells Fargo has introduced its “yourFirstMortgage” program, offering home loans for up to $417,000 with down payments as little as 3 percent.
Borrowers targeted are from low- and moderate-income households or first-time buyers. These groups of potential buyers are finding it challenging to afford a home with surging prices and tight inventories.
A seller’s market is in place in many areas as low supply has has fueled higher home prices. Meanwhile, lending standards remain tight since the 2007-2008 housing meltdown.
In February, Bank of America announced a similar loan program that offered conventional mortgages with 3 percent down payments.
But these low-down mortgages are not for everyone. Moreover, borrowers who put down less than 20 percent have to pay private mortgage insurance. The PMI premiums adds to the monthly mortgage payment and are required until the loan-to-value falls below 80 percent.
“We want to help more people buy a home of their own, even without a large down payment or traditional credit,” says Wells Fargo on its website.
Wells Fargo also aims to simply the process for low-down mortgages with partner Fannie Mae.
“There are a lot of conventional loan products with low down payment options, but the criteria are so complex that it creates barriers for many qualified borrowers,” said Brad Blackwell, Executive Vice President, Wells Fargo Home Lending. “With yourFirst Mortgage, we wanted to provide access to credit and simplify the experience while maintaining responsible lending practices. We partnered with credit experts such as Fannie Mae and Self-Help, an affiliate of the Center for Responsible Lending, to develop an easy-to-understand affordable loan option that gives homebuyers the best offering in the market.”
In the application process, Wells Fargo says that a credit history is expanded to include nontraditional sources, like tuition, rent, or utility bill payments.
Income of others who will live in the home, such as family members or renters, can be considered, the lender states.
A FICO score of at least 620 is required to be eligible for the loan.