Whom ownership is most important in our life it keeps us secured and mostly provides freedom, peace, and happiness. As every people have a dream to buy or built their own sweet home but most of us give up from this dream because of financial disabilities. For this reason, some people choose a home loan for buying their dream home. But it does not mean that it is easy to get a loan from mortgage lenders. Every mortgage lenders have some Standard requirements with credit limits and people must meet this requirement to qualify for a loan. People those who have a good credit history with maximum savings and eligible for a loan, they can get home loan easily.
If you have a lower credit score, what does it means? Do you have no luck to buy your dream home? No obviously not. Wells Fargo gives us an opportunity to get a home loan with a lower credit score. Wells Fargo is a banking institution and the largest mortgage lenders in the United States. It currently works with 5319 branches that are located in 37 states and provide mortgage, private banking and equity, investment and corporate banking, financial services, and other facilities to their potential consumers. Therefore, you can fulfill your wish or dream to buy a home to get a loan, as Wells Fargo allows low credit score home loans.
In this article, we will discuss Wells Fargo 500 credit score home loan and will inform you that which program they offer with 500 credit score.
Credit Score Definition
A credit score is a statistical inquiry or analysis which is calculated based on a person’s credit history (total levels of debt, number of open accounts, and repayment history) to represent the creditworthiness. The credit score is used by mortgage lenders to help decide on whether to go on or refuse credit. It is a number ranging from 300 to 850 where 300 are a poor score and 850 defines the highest credit score. Mortgage lenders use this credit score to assess the person’s probability that they will pay their loans on time. This credit score is influenced by five classes that are payment history, new credit, types of credit, current debt, and length of credit.
FICO Score standard
- 800 to 850 = Exceptional.
- 740 to 799 = Very good.
- 670 to 739 = Good.
- 580 to 669 = Fair.
- Very poor =300 to 579.
Wells Fargo 500 Credit Score Home Loan FHA Loan
Wells Fargo provides different types of loan that are Fixed rate mortgage, Adjustable rate mortgage (ARM), VA loan, FHA loan, Jumbo loan, New construction loan, Renovation loan, Military mortgage and your first Mortgage (Conventional Mortgage). Wells Fargo home loan rates are comparatively better than other lenders and they provide this home loan with lower credit score also with a lower down payment, sometimes with no down payment. Every loan program has a separate standard credit limit. In case of an FHA loan while some lenders set their minimum credit score limit 640 but Wells Fargo has lowered the credit Score Requirement for FHA Loans as low as 500 credit score.
That means you can get an FHA loan with a 500 credit score by Wells Fargo. In this case, with this 500 credit score, you have to give a 10% down payment and bear a maximum debt to income ratio of 31%. Whereas, if you have a minimum credit score of 580 or more you have to put only 3.5% down payment. FHA loan set this policy to strengthen the finances. At the previous time, Well Fargo only accepts FHA loans from borrowers who have a credit score of 600 or more. This movement has happened from the pressure of HUD.
As Wells Fargo FHA loans help you to buy a home with limited credit and lower down payment but you have to meet some criteria to qualify for a home loan. These are:
- FICO Credit score of at least 500.
- 580 or higher credit score requires a 3.5% down payment.
- 500-579 credit score requires a 10% down payment.
- A debt to income ratio of 50% or lower.
- Must have valid income.
- Have the ability to afford the housing payment and any existing debt.
- The house must be your primary residence that must fulfill the minimum property requirements of an FHA Loan.
Wells Fargo FHA loan advantages and disadvantages
Advantages
Wells Fargo has provided different types of loans and every loan program has its own advantages. Similarly, Wells Fargo FHA loan has several advantages. Here’s the top five:
- Provide fixed rate and adjustable rate financing.
- Lower down payment as low as 3.5%.
- Allow you to use a gift fund to cover the down payment.
- Require less cash up-front.
- Qualify with a co applicant, even the individual those who don’t live in the home.
Disadvantages
As Wells Fargo FHA loan has huge advantages but it has some limitations also. These are as follows:
- Higher down payment for those who have 500 credit score.
- Higher monthly payment.
- Require FHA mortgage insurance.
Credit Score Standards of Wells Fargo
Excellent = 760 or higher
With this excellent credit score, you will qualify for the best rates depending on the Debt To Income (DTI) ratio and collateral value.
Good = 700 to 759
This score will qualify for credit based on DTI and collateral value, but may not allow getting the best rates.
Fair = 621 to 699
With this credit score, you may have to face difficulty in obtaining the credit, and probably the lender applies the higher rates for it.
Poor = 620 & below
With this limited score, you will qualify for a loan but you will find more difficulties to obtain unsecured credit. In this case, you will have to put larger down payment also interest rate will be higher.
No credit score
Maybe you not built enough credit to evaluate a score for a loan, or might possible that your credit has been inactive for some time.
Wells Fargo Mortgage Interest Rates and Monthly Payments
This is the general rule the longer the loan the higher the interest rate and higher the APR. Wells Fargo mainly offers thirty, twenty, and fifty years fixed rate loan although some mortgage lenders leave the 20 year option. When it comes to a fixed rate mortgage, you will have to pay the set of amounts for a specific time period. Also, you have to keep or maintain good savings for the down payment. However, getting a mortgage with Wells Fargo is not all time great rather its interest rates and annual percentage rates are slightly higher than a massive portion of its direct competition.
Indirectly means that Wells Fargo extra cost is comparatively bigger, whereas the APR includes fees and other expenditure but the interest rate does not do. Besides the interest rate and APR, the other major factor is monthly payments. What will be your monthly payment if you choose a specific mortgage? For example, if you take Wells Faro 500 credit score home loan program (FHA loan) then your monthly payment and interest rate will be higher. However, Wells Fargo has defined the information by which you can get the idea that what will be your monthly payments and interest rate for their different mortgages.
- 30 Year Fixed Rate Mortgage provides a 3.125% Interest rate and $857 monthly payments (per month for 30 years).
- 15 Year Fixed Rate Mortgage provides a 2.50% Interest rate and $1,334 monthly payments (per month for 15 years).
- 5/1 ARM provides a 2.50% interest rate and $790 monthly payments (per month for 5 years).
Note: The payment calculation does not include homeowner’s property taxes, closing costs, and insurance.
Frequently Asked Questions
1. Which credit score does Wells Fargo use?
Although the FICO credit score range is 300 to 850 most of the lenders set their minimum credit limit that is 600+ and Wells Fargo also maintains a different standard for a home loan. But Wells Fargo allows the FHA loan with a minimum 500 credit score with a 10% down payment and 580 credit score with a 3.5% down payment.
2. Can I get a home loan with a 500 credit score?
Yes, you can get a home loan with 500 credit score. Wells Fargo has lowered the credit score for FHA which is 500 credit score. You can get a home loan with this lower score but you have to pay a 10% down payment for it.
3. What credit score does Wells Fargo required for home loans?
Normally Wells Fargo needs 500 credit score for FHA loan but needs a higher down payment. But if you want to go with a low down payment you can choose a conventional loan. For this home loan, Wells Fargo required 600 credit scores with a 3% down payment.
4. How can I quickly raise my credit score?
You can quickly increase your credit score by following these tips; 1. Pay every type of bills on time, 2. Get credit for making utility and cell phone payments promptly, 3. Pay off debt and keep balances low on credit cards, 4. If need then applies for new credit accounts, and 5. Don’t close the unused credit cards.
Conclusion
Wells Fargo 500 credit score home loan program is applicable for FHA loans only. You can get a home loan with a 500 credit score with a 10 percent down payment. I can say it is not always good for you as this low score has limitations also, you have to face larger down payment and your interest rate & monthly payment will be increased. So, it will be knowledgeable for you to boost your credit score immediately. Therefore, this is all about this topic, and thank you for staying with us.