Well Fargo Unveils 3% Down Payment Mortgage

Wells Fargo & Co WFC announced a new home loan initiative. Called, "yourFirst Mortgage," the program offers down payments at as little as 3 percent for applicable mortgages. The program is aimed at first-time homebuyers and low- to moderate-income families.

The Initiative

Wells Fargo has teamed up with Fannie Mae and Self-Help, an affiliate of the Center for Responsible Lending, to develop the easy-to-understand affordable loan option.

In addition to the low interest rates, the program also provides lower out-of-pocket costs and expanded credit criteria. The program minimizes the loan application complexity, which typically can be a deterrent against such programs, the company claims.

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"There are a lot of conventional loan products with low down payment options, but the criteria are so complex that it creates barriers for many qualified borrowers," Wells Fargo Home Lending Executive Vice President Brad Blackwell said in a press release.

While the loan is fully documented and underwritten, customers who have a down payment of less than 10 percent may earn a 1/8-percent cut in interest rates when they complete a homebuyer education course.

Furthermore, down payments and closing costs can be applied through the program from gifts and down payment assistance programs.

"We have to make clear the borrowers have the ability to repay the mortgage. We have to make sure that they have a history of repaying or at the least responsible management of their finances," Blackwell told CNBC.

Too Good To Be True?

But, CNBC's Diana Olick said "that is the issue," because a FICO score of 620 implies that the borrower doesn't have a good history of repaying debt and managing finances.

She said a Fannie Mae executive admitted that it would be rare for such low FICO score borrowers to qualify unless they have huge salaries and lot of cash in the bank.

"But of course first time homebuyers don't," Olick said on CNBC.