Wells Fargo, regarded as the nation’s top lender, has decided to cut down the minimum credit score required to obtain an FHA loan. The wells Fargo 500 credit score home loan, comes as 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 bottom or have already seen the bottom. These 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
They granted this move 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 underserved and not the everyday joe.
In previous months, Wells Fargo and other top lenders raised the minimum credit score to obtain FHA loans. There are also reasons to believe that loans originating 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 compared to the 50.4 percent statistics gotten at the end of 2008. In mid-2010, the FHA announced that it had reduced its minimum credit score to five hundred, but you would need a 580 credit score 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 to fix a bad credit score. This is very important as it would help establish a credible and reliable payment history needed for obtaining FHA loans.
If you have past credit score problems, you can also improve them with time and 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 buying a home. Furthermore, the minimum credit score 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 taken into consideration when an applicant wants to apply for a loan. Mortgage lenders are also known to look into an applicant’s debts, income, and several other aspects of an applicant’s financial situation.
In most cases, an applicant needs to be employed steadily for about two years before a loan is granted, and nonhousing 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 will likely face paying a huge down payment.