A less-than-perfect credit score is no longer an obstacle to buying a single-family home or townhouse in Southern Nevada.
Following a recent decline in demand for refinancings, Wells Fargo &Co., the nation’s largest mortgage lender, is easing some mortgage loan qualifications to boost lending.
Wells Fargo will drop its minimum credit score for loans backed by the Federal Housing Administration to 600 from 640. The change applies only to purchase loans, not refinances, taken out through its retail business.
“We are giving access to credit for the first time to low- and middle-income homebuyers,” Wells Fargo Home Mortgage spokesman Tom Goyda said. “This decision is consistent with our responsible lending principles.”
Goyda disputed media reports saying the bank was getting back into the subprime housing market. Technically, though, Wells Fargo is extending loans to borrowers with subprime credit, so they could be called subprime mortgages.
But unlike the irrational exuberance that led many banks and mortgage companies to make risky home loans to borrowers who had little chance of paying them back, these loans are fully documented, fixed-rate mortgages.
The FHA requires minimum down payments of about 3.5 percent, making it attractive for first-time homebuyers. Potential borrowers with credit scores below 580 have to put down 10 percent.
Wells Fargo is the only large financial institution to ease its mortgage requirements. Many lenders remain on the sidelines after stopping in 2009 the approval of FHA loans to borrowers with credit scores below 640 as mortgage defaults soared.
Goyda said the bank launched the program in January. He added that it’s still too early to tell how successful it has been locally.
Jon Copeland, president of the Nevada Mortgage Bankers Association, said Wells Fargo’s decision will open the market for more loans.
“These are fully documented loans, meaning mortgage brokers will verify income and assets,” he said,
Copeland said lowering credit score qualifications should help many people in Las Vegas who are recovering from the recession and looking to purchase a home. He said a first-time homebuyer will have a better opportunity to qualify for a 15-year or 30-year fixed rate or adjustable rate mortgage.
Contact reporter Chris Sieroty @reviewjournal.com or 702-477-3893. Follow @sierotyfeatures on Twitter.