The latest news on FHA loans is the reduced credit requirements for borrowers, according to the article below. This news can significantly help those who are purchasing for the first time, or borrowers that have been struggling to repair their credit. Increasing the debt-to-income ratio – a system of figuring how much the borrower can afford- has been a noticeable trend as of late, making the process of obtaining an FHA- backed loan that much easier.
Before the mortgage meltdown a loan officer would be able to get a borrower approved with a median credit score of less than 640 without much trouble. The problem up until recently is that many mortgage lenders were required to buy back loans that they sold, and had to increase the criteria for borrowers to defend from that happening again. Even though the minimum credit score for FHA has decreased, all loans are underwritten and proof of ability to repay is required.