Wells Fargo announced on Thursday that it now offers a down payment of as little as 3% for fixed-rate mortgages, answering calls in the industry to expand the financing box.
Wells Fargo now offers 3% down payment mortgages
The newest low-down payment program, your First Mortgage, which went live on Monday, offers lower out-of-pocket costs, expands credit criteria and pushes home buyer education to assist more first-time homebuyers and low- to moderate-income families achieve sustainable home ownership.
“With your First Mortgage, we wanted to provide access to credit and simplify the experience while maintaining responsible lending practices. We partnered with credit experts such as Fannie Mae and Self-Help, an affiliate of the Center for Responsible Lending, to develop an easy-to-understand affordable loan option that provides homebuyers the very best offering in the market,” said Brad Blackwell, executive vice president with Wells Fargo Home Lending.
If there was clearly a word that summarized why this program is different for Wells Fargo, it could be simplicity. Greg Gwizdz, executive vice president of national retail sales with Wells Fargo, said in an interview, “One of the cornerstones of the product is simplicity. The complexities create barriers for most homebuyers because they genuinely have a difficult time understanding what they need to do to qualify.”
For example, to simplify the process, mortgage insurance can either be rolled in to the cost of the loan or purchased separately by the borrower.
One key factor in the new program that makes it different than the remainder of the market is that it only requires a 620 FICO score.
However, Gwizdz emphasized that while the FICO is only 620, people shouldn’t get hung up on that one element.
“We feel we have a strong balance of risk and opportunity for home ownership. We looked at all the FICO information, and 620 struck the right balance. We believe consumers with 620 and over combined with education and the ability to repay has strong performance. It’s really the combination,” he said.
Back in February, Bank of America also announced a program with as little as 3% down that will require no mortgage insurance. While Bank of America also partnered with Self-Help Ventures Fund, it partnered with Freddie Mac instead of Fannie Mae.
Key factors in Bank of America’s program are that the three companies are working together to originate and back the loans. This means that Self-Help will buy the loans and servicing rights, together with taking the first-loss position. Freddie Mac will then purchase every one of the eligible affordable mortgages originated via the Self-Help and Bank of America partnership.
The Bank of America program also requires a minimum FICO score of 660, and first-time buyers must take part in home buyer education.
This is not the model that Wells Fargo is utilizing, rather the bank worked with Fannie and Self-Help to better understand borrowers and first-time homebuyers.
Gwizdz said that the mortgages in this program will go through Wells Fargo’s capital markets team after origination just like any other program.
Also, while Wells Fargo does not require home buyer education, it encourages it and gives customers who have a down payment of under 10% the chance earn a 1/8 percent interest rate reduction after they complete a home buyer education course.
Gwizdz added, “Wells Fargo historically has put a lot of effort put into sustainable home ownership, and it’s been very clear to use over the last couple years that one of the barriers has been the down payment.
Nick & Cindy Davis with RE/MAX Premier Group have worked with several loan officers with Wells Fargo and can assist you with your home purchasing needs here in the Tampa Bay and surrounding area. We are always available by calling us at 813-300-7116 or simply click here and we will be in touch with you.