LOWER QUALIFYING CREDIT FOR FHA LOANS

Wells Fargo has announced a MAJOR REDUCTION in minimum credit score for FHA loans. The new minimum credit score to qualify for FHA financing has been lowered to "500". This represents a significant easing of credit floor standards by Wells Fargo. This is not an industry wide change, this is unique to Wells Fargo Home Mortgage. In order to qualify for financing in the newly created lower tier, a maximum of 90% financing is allowed. The following is the new credit (score) guideline:

• Loan score lower than 500 = not allowed
• Loan score 500 to 579 allowed with maximum 90% LTV and the additional requirements listed below
• Loan score 580 - 599 allowed with maximum 95% LTV and the additional requirements listed below
• Loan score 600 and higher allowed with maximum 96.5% LTV

Additional requirements: All of the following requirements apply for transactions with loan scores less than 600:

• Maximum rations of 31/43
• 2 months reserves PITI
• Gift funds not to be used for 5% or 10% down programs
• Down payment assistance programs not allowed for 5% or 10% down programs.

It is IMPORTANT TO NOTE that, unlike Fannie Mae financing, interest rate adjustments/penalties are not applied on a graduating score basis. As a result, a borrower that formerly was assuming a 10% down purchase transaction, Fannie Mae conforming, will have a significant rate advantage with FHA. And, lower score application are ineligible with Fannie Mae, while now eligible down to a 500 score, with the same LOW RATE.

A complete pre-approval is highly recommended to determine eligibility and final rate.