- If you’ve been hearing the buzz that Wells Fargo is now offering FHA financing down to a 500 credit score, let me confirm that it’s true! For the right buyer, the 600 credit score has now been lifted with some additional parameters.
- Down payment - for credit scores of 580-599, a 5% down payment is needed. For scores between 500 and 579, 10% is needed.
- Debt to Income Ratio - FHA has always been flexible with the debt to income ratio. When going to a lower credit score, though, they’re requiring ratios similar to what a conventional loan would want (31%/36% required).
- Limits on seller contributions - the seller contribution is limited to 3%.
- No gift funds - the down payment has to be the buyers own money.
- FHAs existing rules on judgments, collections, bankruptcies, etc. still apply. For many buyers, though, this lightening of the requirements is a HUGE win. If you have been previously turned down because there score was too low, give me a call! I’d be happy to guide you through the process!