Wells Fargo whom is regarded as the nations top lender has has decided to cut down the minimum credit score required when you want to obtain an FHA loan. The wells fargo 500 credit score home loan comes as a surprising news for all and this means that banks would start paying considerations to people who have a credit score minimum of 500 when they come to obtain FHA loans. However, even though the process has been made a bit simple and easy, borrowers still need to make a down payment of about ten percent.
Apart from making a down payment of about ten percent, borrowers also need to have a sport maximum debt to income ratio of about thirty one percent. Looking at all of these conditions and requirements, it is safe to say that obtaining an FHA loan is a safer bet based on the fact that the prices of homes are quite close to hitting the bottom or have already seen the bottom. This options are safer now because previously, obtaining FHA loans requires you to have a minimum credit score of six hundred and above.
Wells Fargo 500 Credit Score Home Loan
This move was granted because of the pressure from the HUD. The HUD is the body that oversees all of the FHA loans alongside advocating for affordable housing and they came up with this idea because they believe that the FHA loan is meant to serve people who we refer to as the undeserved and not the everyday joe. In previous months, Wells Fargo and other top lenders raised the minimum credit score when it comes to obtaining FHA loans.
There are also reasons to believe that loans which originate from correspondent lenders and mortgage brokers would carry harsh underwriting standards with a minimum credit of 620 to 640. Towards the third quarter of 2010, about 3.8 percent of the FHA loans already had either no credit scores or scores below 620 when compared to the 50.4 percent statistics gotten at the end of 2008.
In mid 2010, the FHA made an announcement that it has reduced its minimum credit score to five hundred but a 580 credit score would be needed if you want to qualify for the 3.5 percent down payment program. However, one thing you should not do is assume that your FHA loan might not get approved. Are there changes in your credit score since the last time you ran a credit report? There are possible options that can help you improve your credit score.
In some cases, potential borrowers might need to use up to a year or less or more in order to fix a bad credit score. This is very important as it would help in establishing a credible and reliable payment history needed for obtaining FHA loans. If you have past credit score problems then you can also improve them with time and therefore find yourself eligible once more under the new FHA loan credit score requirement. Requesting help from the FHA in terms of credit counseling is the first step that you need.
Or you can also request help if it is your first time to buy a home. Furthermore, the minimum credit score that is required for getting the FHA loan clearly depends on what FHA loan product you want to apply for. As an applicant, if you have a credit score of below five hundred then you are not considered eligible for the FHA mortgages. Applicants with a credit score of five hundred are one hundred percent eligible for the FHA loan financing without making a down payment.
Another thing that you have to keep in mind is that your credit score is just one of the points that is taken into consideration when an applicant wants to apply for a loan. Mortgage lenders are also known to look into an applicants debts, income and several other aspects of an applicants financial situation. In most cases, an applicant needs to be employed steady for about two years before a loan is granted and non housing debt obligations should not consume a good amount of your income.
Even though you somehow qualify for an FHA loan with a minimum credit score of five hundred, you are likely to face paying a huge down payment.