For many first-time homebuyers, an FHA loan is about the only option. It offers a low, 3.5% down payment and doesn’t require as high a credit score as most conventional loans. But it can be a lengthy and complex process.
Wells Fargo is launching a product that it says is a viable alternative to the FHA loan. Called yourFirst Mortgage, it is a conventional 30-year fixed rate loan requiring just 3% down. Wells Fargo says it also comes with a streamlined application process.
“There are a lot of conventional loan products with low down payment options, but the criteria are so complex that it creates barriers for many qualified borrowers,” said Brad Blackwell, Executive Vice President, Wells Fargo Home Lending.
Blackwell says yourFirst Mortgage is tailored to first-time buyers several ways. Besides the low down payment requirement, the down payment can come as a gift from parents. Applicants who take a homeowner education course can knock an eighth of a percent off their rate.
The lower credit score threshold is to help applicants who have not yet built up much credit. Credit history is being expanded to include nontraditional sources of information, like tuition, rent, or utility bill payments.
Income of others who will live in the home, such as family members or renters, can be considered.
With the launch of the new product, Wells Fargo insists it is not going back to the housing bubble days when people who couldn’t afford houses were able to easily qualify for mortgages.
“With yourFirst Mortgage, we wanted to provide access to credit and simplify the experience while maintaining responsible lending practices,” Blackwell said. “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 gives homebuyers the best offering in the market.”