An estimated one third of Americans now have FICO scores below 620, according to one consumer group’s estimate.
Wells Fargo’s newly revised policy actually dips the FICO score cutoff line well below 580 — all the way down to deep subprime 500 — but also sets strict underwriting hoops and snares to weed out unqualified applicants. For example, borrowers with scores between 500-579 will need a 10 percent down payment from their personal resources. They will not be able to use gift money from relatives, friends or a charitable down payment assistance program to meet the 10 percent upfront equity test.
Home buyers with scores of 580-599 will need 5 percent down payments, and will be prohibited from supplementing their own cash with gifts.
Borrowers with FICOs above 600 will qualify for 3.5 percent down payment FHA deals, but will be allowed to use gift money. Contributions from home sellers to defray buyers’ closing or loan origination costs will be limited to 3 percent.
Debt-to-income ratios will be tight: 31 percent for monthly housing-related expenses, and 43 percent for total household debt service.
The expanded program will only be available through Wells’ retail lending channel, not through third-party brokers or correspondent lenders. To read more on this topic visit Inman News at Share http://www.inman.com/…
Ken Harney who writes an award-winning, nationally syndicated column, “The Nation’s Housing,” and is the author of two books on real estate and mortgage finance.
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