Wells Fargo yourFirst Mortgage Program Pros and Cons
Key benefits of the program include a low required down payment, no borrower income limits or property location restrictions, a lower mortgage rate for borrowers who complete a counseling class and the ability to use non-traditional income sources to qualify for the loan. Potential yourFirst Mortgage Program considerations include relatively tougher borrower qualification requirements, loan limits as well as restrictions on property type and mortgage program.
Borrowers should understand both the positives and negatives of a Wells Fargo yourFirst mortgage to determine if it is the right program for them. We review the full list of the pros and cons for the Wells Fargo yourFirst Mortgage Program below.
Wells Fargo yourFirst Mortgage Pros
Low Down Payment
The yourFirst Mortgage Program enables you to buy a home with a down payment as low as 3% of the property purchase price. Additionally, the yourFirst Mortgage Program can be combined with a gift, down payment program or closing cost assistance grant to allow you to buy a home with minimal personal financial contribution. Saving sufficient funds for a down payment is one of the biggest challenges to buying a home for many people. By providing the opportunity to buy a home with little or no down payment and borrower financial contribution, the yourFirst Mortgage Program makes home ownership more attainable.
Interest Rate Discount for Borrowers who Complete Home Buyer Counseling Class
Although Wells Fargo yourFirst Mortgage applicants are not required to take a home buyer counseling class, borrowers that make a down payment of less than 10% of the property purchase price may be eligible to reduce their mortgage rate by .125% by completing a HUD-approved home buyer counseling class. Although a .125% reduction in interest rate may not seem like much, it lowers your monthly payment and can save you thousands of dollars in total interest expense over the life of your loan. For example, for a $150,000 30 year fixed rate mortgage, a .125% reduction in interest rate reduces your total interest expense by more than $3,700.
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No Borrower Income Limits or Property Location Restrictions
The Wells Fargo yourFirst Mortgage Program does not apply borrower income limits or restrict where the property being financed is located. Several other no or low down payment mortgage programs including the Fannie Mae HomeReady Program and Freddie Mac Home Possible Program may apply maximum borrower income limits, depending on where the property is located. These income limits and property location restrictions reduce the number of home buyers who are eligible for those programs and can make it more difficult to find a home you can buy using the programs. Eliminating borrower income limits and property location restrictions makes the yourFirst Mortgage Program easier to use and accessible to more home buyers.
Ability to Use Non-Traditional Sources of Income to Qualify for Mortgage
The yourFirst Mortgage program enables applicants to use non-traditional income sources to qualify for a mortgage. When you apply for a mortgage usually only the applicant's income is used to qualify for the loan but with a Wells Fargo yourFirst Mortgage income from non-borrower household members such as relatives or renters can be included to determine your ability to qualify for the mortgage. Although these individuals are not listed on the mortgage application as co-borrowers, their income can be used to help applicants afford a larger loan to buy more home. For example, if you buy a home that your parents also live in, the income from your parents can be used to qualify for a larger mortgage amount although your parents are not co-borrowers and do not own the home. In short, the ability to use non-traditional sources of income with the yourFirst Mortgage Program enhances your ability to get approved for a loan and potentially enables you to buy a better home. This program feature is similar to the HomeReady Program that also permits the use of non-borrower household member income to enable borrowers to qualify for a larger mortgage.
No Upfront Mortgage Insurance Cost and Lower Monthly PMI Cost
Unlike government-backed low or no down payment mortgage programs such as the FHA, VA and USDA programs, the Wells Fargo yourFirst Mortgage Program does not require borrowers to pay an upfront mortgage insurance fee. Eliminating the upfront fee potentially reduces borrower closing costs by thousands of dollars, making it more affordable to get a mortgage to buy a home. In addition to not requiring an upfront mortgage insurance fee, the ongoing monthly private mortgage insurance (PMI) cost for a Wells Fargo yourFirst Mortgage may be lower than the monthly PMI fee for a standard loan or the mortgage insurance premium (MIP) for an FHA loan, depending on your credit score and loan-to-value (LTV) ratio. Additionally, PMI is removed when your LTV ratio falls below 78% as you pay down your mortgage or your property value increases whereas you are required to pay FHA mortgage insurance over the entirety of an the loan.
Wells Fargo yourFirst Mortgage Cons
Relatively Conservative Borrower Mortgage Qualification Requirements
The Wells Fargo yourFirst Mortgage Program uses relatively conservative borrower qualification requirements as compared to other no or low down payment mortgage programs. For example, the yourFirst Mortgage Program requires a minimum borrower credit score of 620 as compared to 580 for the FHA Mortgage Program. Despite the higher credit score requirement, the yourFirst Mortgage Program may also consider non-traditional credit profiles for borrowers with no credit score or limited credit history. Please note, however, that borrowers with lower credit scores may find it challenging to qualify for the yourFirst Mortgage Program. Credit-challenged borrowers typically must have compensating factors such as significant savings or a low debt-to-income ratio to qualify for the program. The yourFirst Mortgage Program uses a borrower debt-to-income ratio of approximately 43% which is lower than standard mortgage programs as well as the HomeReady and FHA mortgage programs which permit a borrower debt-to-income ratio of 50% or higher under certain circumstances. A lower debt-to-income ratio reduces what size mortgage you qualify for which may limit what price home you can buy using the yourFirst Mortgage Program.
Loan Limits
The yourFirst Mortgage Program limits the size of loan you can obtain through the program. The program uses the conforming loan limit, which is $726,200 for a single unit property in the contiguous United States. In Alaska and Hawaii the conforming loan limit is $1,089,300 for a single unit property. People who live in more expensive areas of the country may find that the yourFirst Mortgage Program loan limits reduce their housing options. The loan limits are less of a factor for home buyers interested in less expensive homes.
Restrictions on Property Type
Only single-family, owner-occupied primary residences are eligible for the yourFirst Mortgage Program, unlike other low or no down payment mortgage programs that permit participants to buy multi-family properties with up to four units (as long as you occupy one of the units). By only allowing single-family properties, the program potentially limits the rental income from units in a multi-family property that borrowers can use to help pay their mortgage and offset their total monthly housing expense.
Only Applies to Purchase Mortgages
The Wells Fargo yourFirst Mortgage Program only applies to purchase mortgages and you cannot use the program to refinance an existing mortgage. Several other low or no down payment mortgage programs apply to both purchase mortgages and refinances including the HomeReady, Home Possible, FHA and VA mortgage programs.
Restrictions on Loan Program
Only fixed rate mortgages are eligible for the yourFirst Mortgage Program. Borrowers cannot use adjustable rate mortgages (ARMs) or interest only loans with the program. Restricting the mortgage program that borrowers can use may limit your financial flexibility and cause you to pay a higher interest rate over the initial period of the loan as the rate on an fixed rate mortgage is usually higher than the initial rate on an ARM. On the positive side, a fixed rate mortgage offers borrowers certainty that their interest rate and mortgage payment will not change over the life of their loan.
More FREEandCLEAR Resources
Wells Fargo yourFirst Mortgage Program Guide
Review our comprehensive overview of the Wells Fargo yourFirst Mortgage Program including program eligibility, borrower qualification guidelines and other important program information.
Mortgage Rates
Borrowers should compare mortgage rates for the Wells Fargo yourFirst Mortgage Program to rates for other loan programs. Use our mortgage rate tables to contact lenders in your area and to view updated interest rates and fees for multiple mortgage programs. Comparing proposals from multiple lenders is the best way to save money on your mortgage.
Comparison of No or Low Down Payment Mortgage Programs
Review and compare multiple conventional and government-backed no or low down payment mortgage programs to understand key program benefits and eligibility requirements.
Sources
"yourFirst Mortgage." Home Loan Types. Wells Fargo, 2020. Web.