I posted what I thought was a great answer back last Wednesday. Well, I have updated news for you! I wanted to share this last Friday, but needed to wait until it was all 100% official before sticking it out here on the internet. I am sure you understand. And remember, I am an expert in real estate; I am not a loan officer.
Rather than re-type the information for you, I am going to paste in here what i just now posted on my Facebook page. So here is the entire story for you and I hope it thrills you. I shared your story with my loan officer and he would be more than happy to explain it all to you. And by the way, this was in response to a woman asking me a question about this program and wondering if Edina Realty Mortgage (via Wells Fargo) offering loans for people with lower credit scores was a "good idea" or not. Here goes . . . .
Yes, Carrie . . . absolutely it is a good idea. Wells Fargo is piloting this. They were the ONLY bank through that whole mess we went through that stayed in the black. It's because they were very careful and did not get heavily involved in subprime loans, and that is where Edina Realty Mortgage gets their money. That's also why ERM proudly can say that they contributed little or nothing to that crisis.
They have very carefully studied the statistics and demographics on loan defaults. And thus they have specific and special guidelines for these loans to reduce the risk of default.
So here is how it works . . . the borrower must mee the following criteria:
â€¢ Purchase transactions only- refi's not allowed
â€¢ No gift funds are allowed
â€¢ No DAP's are allowed
â€¢ Must have either 5 or 10% down payment, sourced and seasoned
â€¢ Stricter debt ratios and potential reserve requirements
The target customer for this program is someone who has challenged credit, but has the necessary down payment and reserve requirements. As far as I know, Edina Realty Mortgage is the only lender offering this program! Utilization of this program could add as much as 25% new business!
So let me recap for you . . . .
Virtually all lenders have a minimum credit score of 640. there are a select few that can go down to 620. Only Edina Realty Mortgage and Wells Fargo can go down to 600. That has been in place for awhile. And this is for a FHA loan with 3.5% down payment.
This new rule allows someone with a score between 580-599 to get a FHA loan, but they must put 5% down and it must be THEIR cash.
It allows someone with a credit score between 500-579 to still get a FHA loan, but requires at least 10% down.
The way it was explained to me was simply that based on statistics, with property values increasing steadily now, and the fact that these buyers put in a decent amount of their own cash, there is a minimal risk of default. But as I shared above, the other caveat is that there are slightly stricter debt to income ratios and other reserve requirements.
That all said, remember that I am NOT a loan officer. I am an expert in real estate. But in order to be an expert at what i do I need to have my arms around all of this information to properly guide buyers and keep them informed. I'd be glad to refer you to a good loan officer who can answer any questions you or anyone else has. I try to stay out of all that.
That said, would you like to know an interesting statistic? I actually have my notes from a session I attended last week. Check this out . . .
In a national survey by the NAR, 88% of first time home buyers believed that applying for a mortgage would be very difficult and did not feel they would qualify.
68% said later - after the fact - that it was "not at all difficult".
And the best part: ONLY 5% OF THEM DID NOT GET APPROVED!!
Translation: the vast majority of first time home buyers, almost 90%, did not beleive they could get a loan. Yet 95% of them were approved for a mortgage! Isn't that crazy???? I believe this is all because they watch too much "slanted" news reports that are drawn out and sensational.
So if anyone else out there is reading this, please stop second guessing the market. Stop paying rent and get approved for a mortgage and go buy a nice home! The home affordability index is the highest it has been in over 50 years, the rates today (literally today) are lower than the average daily rate through 2010, and the home prices bottomed out about 13 months ago . . . fluctuated up and down a bit . . .and now are moving steadily up. At the rate things are changing, the average person/average loan amount is losing somewhere in the neighborhood of $5000-8000 worth of buying power every month or two.
The timing to own your own home has never been better.
I will be short and sweet. I am sorry that you are hearing so many different stories. I just spoke with a loan officer and have good news for you. And this is very simple. First of all, his minimum requirement for specifically the credit score is only 600. While it is true that most lenders have a 640 minimum credit score requirement, he can go as low as 600.
Secondly, he told me that he would be more than happy to discuss all of your loan options with you if you would please give him a call. His office number is 763.754.4765 and his name is Tony.
I hope that helps. If you have any other questions feel free to contact me.
God bless you!
Contact a good lender whose well versed with first time home buyer plans. I,d suggest a mortgage broker as they're apt to have more options for you than a bank.
Once you know you options, seek an experience Realtor!
I have seen wells fargo giving 4.9 to 600 Middle score. Your down payment will not lower the rates, I would hold on to it, and not put more than 3.5%, but it is up to you. Your wife would not be on the loan, but because you are married would have interest in the property, like yours.
Wish you Best
Contact me, if you don't have an Agent yet
I will walk you to the bank....
Ramona, ReMax Results, Broker Associate,reMax results, MN, email@example.com, 952-239-1697
Sounds like your getting your ducks in a row. Good Luck! Check out my reference for more information.
C: 612 396-0692
Senior Mortgage Consultant
612 701 6816
I would encourage you to speak with a banker to discuss your options as there may be a program you would qualify for. I have a few good recommendations for lenders for you if you are interested that can offer all types of financing and are all very good at what they do. If you are unable to qualify for a home loan at this time, there are homes available where the seller would consider financing your purchase as a contract for deed which would give you time to build credit or if your spouse becomes a wage earner you could then at that juncture obtain financing for the home and refinance the purchase into a standard mortgage loan. This would allow you to buy a home now rather than have to wait to be approved for financing if you are hoping to buy sooner than later. But first it does not hurt to speak with a banker as they may be able to pre-approve you now and if not can offer suggestions for credit repair/credit building etc. to help you obtain a loan in the future.
If you have questions about financing options vs. contract for deed purchases please don't hesitate to ask. I have extensive experience in the finance industry as well as experience with contract for deed purchases and can help answer questions or assist you in the process. Good luck with your endeavors and have fun looking for homes!
Benjamin B Bergen
Bell Mortgage A Division of State Bank and Trust
Metropolitan Home Team at Re/Max Results
Good for you for asking the right questions. This is a challenging time as the loan qualifying process has developed even narrower openings for potential home owners to obtain a mortgage. I think it's a great idea for you to talk to a qualified loan officer/mortgage broker with NO STRINGS ATTACHED! That way, you can just gather information to make an informed and thoughtful decision, rather than someone making you feel pressured to do something RIGHT NOW or you're going to lose it. Make sure you don't allow someone to make you feel "less than" because your financial situation isn't perfect right now.
Let me know if you need some suggestions of loan people to talk to who will treat you with respect and dignity.
Putting more money down does not work anymore. This worked back when we had sub-prime lending. Lenders are very strict now and the credit profile carries more weight than anything else. If you have any cards that haven't been used in a while, go buy something for $10 and re-activate it. DO NOT pay off any old collections as they WILL lower your score. Wait until after all 3 credit bureau scores are pulled before paying off or paying down collection accounts. Paying them now re-opens the account making the collection new. You can check out the link below for credit "repair". Ask for Gail Simmons
I would be happy to discuss your specific situation and provide you with options you have in your current situation. You would have the option to purchase a home now if you choose to use no conventional financing or you could choose to work on your credit for a couple of months and purchase a home using conventional financing. What you would need to do is explore both options and decide what is best for you. If you have any questions feel free to contact me.
Coldwell Banker Burnet
Otherwise, it is a buyer's market, and I have seen more and more sellers willing to look at contract for deed offers, especially with some good down payment. Then you can work on improving your credit to turn the contract for deed into a mortgage down the road.
Let me know if I can be of any help.