The nation’s largest mortgage lender, Wells Fargo, is now offering mortgages to home buyers with just 3% down via their new “yourFirst Mortgage.”
I’m assuming the new loan program is based on Fannie and Freddie’s 97% LTV program announced back in late 2014. And it appears to be geared toward first-time home buyers seeing that the name is yourFirst Mortgage.
That reads as your first mortgage, meaning your first home purchase as well.
The program is available for qualified first-time buyers, including low-to-moderate income applicants as well as the “diverse Millennial population,” which Wells points out is over two-thirds of first-timers these days.
I believe anyone who can demonstrate their ability to repay the loan can qualify for a yourFirst Mortgage if they haven’t owned a home in the past three years, or if at least one borrower on the loan hasn’t.
yourFirst Mortgage Only Requires 3% Down
- Wells Fargo’s new 3% down home loan program
- No median area income limits
- Down payment assistance and gift funds permitted
- Only loan option is a fixed-rate mortgage
The main selling point to this new mortgage is the 3% down payment requirement, which rivals the 3.5% down required from the FHA.
To make the deal even sweeter, and perhaps riskier if you like, your down payment and closing costs can come in the form of a gift or from a down payment assistance program.
In other words, you don’t need any cash to qualify, other than maybe some reserves to show you can make monthly payments going forward.
To offset this perceived risk, Wells Fargo is offering a 0.125% interest rate reduction if home buyers complete a homebuyer education course conducted by a certified HUD-approved housing counselor. So instead of a rate of 4.5%, you might get a rate of 4.375%.
Your down payment must be less than 10% to qualify for the rate discount.
You might also learn something about mortgages and homeownership, which could prevent default and/or foreclosure in the future.
yourFirst Mortgage Allows Household Income, Non-Traditional Credit
- Flexible underwriting allows for household income
- Including renters and non-borrowing family members
- And non-traditional credit that might not show up on a credit report
- Requires PMI but might be able to get lender-paid in exchange for higher interest rate
Playing on the risky theme, the yourFirst Mortgage allows both household income and non-traditional credit.
So if you eschewed credit for much of your life, like some Millennials appear to do, you can still get approved for a mortgage via this program because everyday bills like tuition, rent, and utilities may be used in place of traditional credit tradelines.
Additionally, you’re able to use income from other occupants in the home (that aren’t co-borrowers), including family members and renters, to qualify for the loan.
But rest assured the loans will be “fully documented and underwritten,” so no new housing crisis here…
It appears that Wells Fargo is working with Self-Help, the company that helped launch Bank of America’s 3% down mortgage back in February of this year, known as the Affordable Loan Solution.
The yourFirst Mortgage does require private mortgage insurance because you’re putting less than 20% down. However, it might be built into the rate or lender paid.
I took a look at Wells Fargo’s rates today and they were advertising 3.75% on a 30-year fixed with borrower-paid mortgage insurance, and 4.375% with LPMI.
yourFirst Mortgage Features
- 3% down payment requirement
- Down payment and closing costs can be gifted
- Down payment assistance permitted
- Property must be owner-occupied (I believe only single unit qualifies)
- Loan is fully documented and underwritten
- No income limits
- Income from others in the household may be used to qualify
- Loan type is 30-year fixed
- Mortgage insurance required (can be lender-paid)
- Minimum FICO most likely 620
- Non-traditional credit may be used (utility bills, tuition payments, etc.)
- 0.125% interest rate discount for completing homebuyer education course