June 1, 2016
In an effort to appeal to homeowners that struggle to save enough to buy a home, some major banks are offering 3% down-payment loan programs. Wells Fargo, JPMorgan Chase, and Bank of America are offering lower down payments that don’t involve the Federal Housing Administration – or mortgage insurance.
Big banks are veering away from FHA loans, citing cost and risk. The risk to banks is that penalties are huge for mistakes. Furthermore, FHA loans tend to default more frequently.
Though 3% down might bring back the early 2000s, when no-percent down could buy a house, the banks believe the situation is different this time around. Unlike the halcyon over-underwriting days, FICO scores need to be between 620-680, depending on the bank.