February 18, 2011 (Jeff Alan)
Wells Fargo & Co. has dramatically lowered credit score requirements for Federal Housing Administration (FHA) mortgages, the first major lender to do so following pressure from the agency and housing advocates.
Beginning last month, Wells began accepting applications in its retail branches for FHA loans from borrowers with FICO scores as low as 500. Previously, it required a score of at least 600 for retail FHA borrowers. The minimum FICO score remains 640 at the company’s wholesale and correspondent channels.
For borrowers with credit scores ranging from 500 to 579, a 10 percent down payment is required, and the down payment may not be a gift or be part of a down payment assistance program.
Borrowers with credit scores of 580 to 599 are required to put down 5 percent, and the down payment may not be a gift or part of a down payment assistance program.
Borrowers with a credit score of 600 or higher are required to have a 3.5 percent down payment, and a gift is acceptable. For all borrowers, seller concessions are limited to 3 percent.
FHA Commissioner David Stevens has been urging lenders in the federal mortgage insurance program to lower their minimum credit score overlays to reach more people.
Tom Goyda, a Wells spokesman, says the bank “is committed to responsibly serving a wide range of borrowers.” Wells was one of 17 lenders – including Bank of America and JPMorgan Chase – that agreed to meet with NCRC officials to discuss ways to comply with FHA’s requirements.
By accepting lower FICO scores in the retail channel, Wells appears to have struck a compromise that allows big lenders to maintain credit overlays. Other major lenders are expected to follow Wells Fargo’s lead.
Tags: Wells Fargo, credit score requirement, FHA mortgages, housing advocates, FICO score