Q: Does Wells Fargo really approve loans with scores as low as 500?
A: They advertise they do, and some people get approved, but a lot people I've spoken to and recent qualifications stories I read about people who apply with lower scores report having difficulty with the actual approval after they are pre-approved, like the pre-approval wasn't very thorough, like the underwriter never reviewed the situation ahead of time, like not until after non-refundable costs have already been incurred. There are several guidelines to be aware of with Wells Fargo's less than 600 credit score program.
#1 They do FHA loans scores down to a 500
#2 580-599 scores require a 5% down payment
#3 Scores below 580 require a 10% down payment
#4 Purchases only
#5 More restrictive debt ratios, nothing over 31% for housing and 36% for total debt ratio
#6 Gift funds and down payment assistance is not permitted
#7 Need to have 2 months of your the housing payment in the bank still available after closing (called "reserves")
#8 Seller closing cost credit cannot exceed 3% of the sales price
#9 More particular about credit history, meaning more time needs to have elapsed from derogatory events than with scores over 600, sometimes up to 3 years
#10 Rates are higher the lower the scores are
Remember not to put the cart (house) before the horse (mortgage financing). A big cause of consumers making bad decisions with mortgage financing is getting their heart set on a particular home before they know they can qualify. It leads to making irrational choices on what one conceives as being affordable & necessary, and the results aren't pretty (difficulty with making payments, foreclosure).
One way to address your medical debt is through the HIPAA letter process, that stands for Health Insurance Portability and Accountability Act of 1996 (HIPAA). It is a 100% legal way to remove medical collections from your credit report as you are using U.S. Law as your basis to remove them.
It requires you have knowledge of the HIPAA law as well as FCRA (Fair Credit Reporting Act), and be ready to write some letters and take action. It can be a bit tough to do that research on your own, so a very nice person, named "WhyChat", decided to take it upon themselves and compile all of the information that is needed on a website at http://whychat.5u.com/hipltr.html - including the legal basis (violations can be pursued by the state attorney general's with annual per violation fines up to $1,500,000 - talk about motivation for collection agencies to comply with the law), step-by-step instructions, links to attorney's opinions and even sample letters for you to copy/use on your own.
It has a 99.9% success rate when done properly - however if you take a misstep there is a good chance it will not work and the medical collections will remain on the credit report until they would otherwise fall off due to the statute of limitations to report such items on the credit report, so do not take any short cuts.
Then with your medical collections gone, your scores are likely to improve, and you can apply with a lender who does a full pre-approval before you make an offer, or have a better chance getting approved with Wells Fargo's pre-qualification process.
CEO & SR Credit & Mortgage Consultant of
Ex-Mortgage Broker of more than 10 years
Mandy Fritsche, Mortgage Loan Officer, NMLS# 557211, Prospect Mortgage LLC
262-327-5700 Cell, 877-868-9198 Fax, email@example.com
Make it a great day!
Coldwell Banker Residential Brokerage
There's no jeopardy here, it won't affect your credit scores.
If you buy it on just his scores and his signature, you should be able to add your name to the Title after the Escow closes.
Good luck and may God bless