Good News from Wells Fargo

Good news coming from Wells Fargo Home Mortgage this week.

No, it’s not that the President’s Club, a group of wealthy top producing Wells Fargo mortgage brokers are going to Las Vegas after all, that all expense trip has been cancelled.

There is more important information. It has been really difficult for homebuyers to make a purchase based on the tighter lending requirements. Those guidelines are mainly good credit and a strong debt to income ratio. Where opportunity now exists is with the down payment. As of early last year, 90 to 95% financing was all but dead and relegated to first time homebuyers, if even them. Well according to Brian Farley with Wells Fargo Home Mortgage, homebuyers of primary residences are now able to make a purchase with 10% down. The drawback is that there will be PMI, that nasty item called private mortgage insurance.

This is something we in the industry have not had to deal with in quite awhile. Mortgage insurers are just as critical in analyzing applicants as the actual underwriter for the loan. So it still is not an easy road. Applicants still need to be qualified. PMI can cost around $175 per month for a loan amount of $325,000. Creative ways for a buyer to make the monthly payment more financially palatable is to roll the PMI into the interest rate. This creates a higher payment, but with rates as low as they are, it can be negligible. Another choice is to ask the seller to pay the PMI. This of course, may not go over too well, but you never know in this market.

It seems as though creative financing is available to make certain purchases. Let’s see if rates go down as Republicans are pushing a 4% across the board interest rate. If this happens, we may see a plethora of creative purchases.