Among housing industry insiders, rising home prices and the effects of student loan debt are popular topics of conversation with respect to the next generation of home buyers. It’s tough to buy a home when you can’t afford one.

Wells Fargo launched the yourFirstMortgage program in May 2016.
Wells Fargo launched the yourFirstMortgage program in May 2016.

Over the past year or so, lenders have launched new programs that tout low down payments in an effort to entice younger buyers. Wells Fargo, the nation’s largest mortgage lender, announced the yourFirstMortgage program in May 2016, which offers fixed-rate mortgages for a down payment of as little as 3%.

Wells Fargo expanded credit criteria to allow more first-time and low- to moderate-income buyers the chance to qualify for the program. Under the program, credit history is expanded to include nontraditional sources, such as tuition, rent, or utility bill payments. Borrowers need a minimum credit score of 620 to qualify.

When asked what sets the yourFirstMortgage apart from other lenders’ programs, Kelly Zuccarelli, national sales manager of new construction, condominium, and renovation finance for Wells Fargo Home Mortgage, said the answer is because it’s simple.

Other lenders that offer similar programs do so with barriers to entry, like income limits and only making it available in certain markets. “There was always this laundry list of disqualifiers,” she says, adding that when the Wells Fargo executive team began to work on the program, the focus was on simplicity and making it easy to understand for home buyers.

The yourFirstMortgage program does not have an income limit and is not restricted to first-time buyers, though it is designed with young adults in mind. Also, for buyers who put down less than 10%, an education course is offered where, upon completion, he or she can earn a ⅛ % interest rate reduction. The course is not mandatory, though, notes Zuccarelli.

Wells Fargo offers yourLoanTracker, which enables borrowers to view their loan’s progress any time from your computer, smartphone, and tablet. It’s a big hit with millennials, Zuccarelli says, which is crucial.

The challenge for Wells Fargo, and for the real estate industry at large, Zuccarelli says, is to educate millennials and people who have become dispirited with respect to homeownership that it’s not as difficult as they may think.

She walked her 25-year-old daughter through the process recently and is now paying less monthly than she would be renting, Zuccarelli says.

The program has been more successful than Wells Fargo anticipated, Zuccarelli says, but figures were unavailable. “I think that other lenders will try and mimic it, but I don’t know that they’ll have the simplicity that we provide with this program,” she says. “There aren’t a lot of ‘gotchas’ in this program.”

Lock it in
Another program that been gaining in popularity is Wells Fargo’s Builder Spec Lock program, which, allows builders to lock in an interest rate for 60, 90, or 120 days on a given home. With the sudden rise in interest rates and with more increases on the horizon, Zuccarelli says the lock is a win for all parties involved.

“It allows a builder to drive traffic to their communities, move inventory faster, differentiate themselves in the marketplace, turn more lookers into buyers, preserve their pipeline, and gives buyers the benefit of a lower interest rate,” she says.

Lock periods can be 60, 90, or 120 days. The 60-day lock is currently free to the builders.

“It’s really relevant because builders are nervous about rising interest rates and protecting their pipelines,” she says. “Many of them have built spec homes, so they don’t want to get caught in a position where they have spec homes that they can’t sell because of these continued rate increases.”

The program is not new and Wells Fargo considered scrapping it during the downturn when there wasn’t a need for it, Zuccarelli says, but decided to keep it. “We knew how important it’d be one day so we stay committed to the product and it’s just gained in popularity over the last 90 days subsequent to the rate increases.”