FHA Loans Getting Easier to Acquire?

First-time and low-income mortgage borrowers may have an easier time qualifying for a Federal Housing Administration loan. Ginnie Mae, a government agency that issues bonds backed by FHA loans, reports that the average credit score on FHA-backed loans fell to 680 in 2013, and the average debt-to-income ratio rose to 40.3 percent — both indicators that credit may be easing.

In comparison, Ginnie Mae reported in January 2013 that the average credit score was 701 and the debt-to-income ratio was 38 percent, and Wells Fargo has reportedly been qualifying FHA borrowers with credit scores as low as 600, down from a previous threshold of 640.

“The FHA theoretically allows credit scores as low as 580,” the L.A. Times reports. “But lenders, buffeted by defaulted loans and demands that they buy back troubled mortgages that they sold, generally have set standards higher since the mortgage meltdown.”

Source: “Average Credit Score Falls on FHA Loans,” Los Angeles Times (Feb. 27, 2014)