Low Credit and Want to Buy…You May be in Luck

Wells Fargo recently announced that those who desire to purchase a home but have credit scores as low as 500 will be able to qualify for FHA mortgages. This announcement came after a slew of articles about how the major banks are stifling home purchases by cranking up the minimum credit score requirement in order to qualify for loans. This policy took effect January 15.

The FHA has a minimum credit score requirement was not being followed by banks, who required a score of at least 600 in order for the buyer to qualify for the 3.5% down payment. Under Wells Fargo’s new plan there will be several tiers for those seeking FHA loan approval.

Borrowers with credit scores of 500-579 will be required to make a down payment of at least 10% of the purchase price–no funding gifts or other assistance is allowed. Those who fall in the 580-599 range will be required to put down 5% (with the same gift and assistance restrictions), and those who have credit scores of 600 or higher will make a 3.5% down payment.

This is a positive move for the housing industry, and will afford more buyers the opportunity to become home owners. Kudos to Wells Fargo; hopefully other lenders will soon follow suit.