New mortgage finance programs with down payments as low as 3 percent have hit the market during a time when, according to the National Association of REALTORS, pending home sales have reached their highest level in more than ten years.
The newest of these programs is through Wells Fargo & Company and offers buyers mortgages with down payments as low as 3 percent. According to The San Diego Union-Tribune, the new mortgage program offers an alternative to loans backed by the Federal Housing Administration (FHA), which have a minimum down payment requirement of 3.5 percent of the home’s purchase price. Per the article, most large banks have veered away from offering FHA loans.
In a press release, Wells Fargo stated that the home loan program will help more qualified first-time homebuyers and low-to moderate-income consumers to become homeowners through lower out-of-pocket costs, expanded credit criteria and incentives for homebuyer education. The company stated that the program is the result of efforts to help families achieve sustainable homeownership through reduced loan application complexity, but still requires full documentation and underwriting to verify a borrower’s ability to repay. At present, 2/3 of first-time homebuyers are low-to moderate-income earners or Millennials.
An article published by REALTOR Mag stated that yourFirst Mortgage extends fixed-rate conventional loans of up to $417,000 to borrowers with FICO scores of 660 or better. In addition, a 1/8 percent interest rate reduction can be acquired through electing to take a homebuyer education course.
Wells Fargo’s yourFirst Mortgage is the newest in a string of low down payment mortgage programs. REALTOR Mag reported that JPMorgan Chase launched the Standard Agency 97% program, which offers first-time buyers with FICO scores of 680 or higher a 3 percent down payment loan. Chase also offers a program called DreaMaker Mortgage, which features a 5 percent down payment. In February, Bank of America launched a 3 percent down payment loan for homebuyers with minimum FICO scores of 660. Bank of America’s loan extends to buyers of single-family primary residences and does not involve the FHA or require mortgage insurance. According to an article published by HousingWire, the program does require homebuyer education.