In a long-anticpated shift, Wells Fargo started providing FHA mortgages to borrowers with credit scores as low as 500 as of January 15, 2011, REALTOR® Magazine reported in its March 2011 issue.
The decision came after the National Association of REALTORS® and Federal Housing Authority (FHA) Commissioner David Stevens criticized the country’s major banks for requiring credit scores as high as 650 in some cases before making loans. At NAR’s annual conference last year in New Orleans, Stevens said banks’ credit policies were out of sync with the FHA and artificially restraining home sales by as much as 20 percent.
Under the new policy, Wells Fargo will accept borrowers with credit scores of 500 to 579, if those borrowers can make a down payment of at least 10 percent; however, gifted funds or other down payment assistance is not allowed. For borrowers with credit scores of 580 to 599, borrowers must make a 5 percent down payment, with the same restriction on gifts and assistance funds. Borrowers with credit scores of 600 or higher can make a 3.5 percent down payment.