LAS VEGAS - A low credit score may no longer get in the way of buying a home. One of the country's leading lenders is easing some of its mortgage loan qualifications and getting back into the subprime market.
Wells Fargo will sign off on government-backed home loans if you have a credit score of at least 600. The bank dropped its minimum credit requirement by 40 points.
This is a big move for the corporate giant. Wells Fargo is trying to make up for its overall revenue losses by getting back into the subprime market.
Wells Fargo representatives say lowering credit standards will not lead to another housing crisis. They say new laws are in place to prevent irresponsible borrowing and lending. Some of those laws require extensive background checks that go beyond credit scores.
"It's about balancing, again, access to credit with responsible lending. All these loan applications are fully underwritten and documented, and borrowers must demonstrate ability to repay their loans," said Tom Goyda with Wells Fargo Home Mortgage.
Wells Fargo is the only major bank easing its mortgage loan requirements, but several smaller banks in Las Vegas are doing business with customers who have credit scores as low as 580, which is the minimum requirement under Federal Housing Authority regulations.
Nevada Mortgage Bankers Association President Jon Copeland says lenders look at several factors when considering a loan, including job history and income.
"These loans are insured by the Federal Housing Authority, and they are full documentation loans, meaning they're going to verify the income. They're going to verify the assets," he said. "Just because their credit scores are a little lower, doesn't mean that they're a bad risk."
Copeland says lowering credit score qualifications will help people in Las Vegas. Our city was one of the hardest hit during the housing crisis. A first-time home buyer now may have a better opportunity to get inside a home with a 15-year fixed rate, 30-year fixed rate or adjustable rate home loan.
The latest numbers by the Federal Reserve show more people are taking out mortgage loans. In the last quarter of 2013, mortgage debt increased by $16 billion from 2012.
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