Are you a first-time homebuyer who does not have a high income? Up till now you probably dreaded the thought of loan qualification, but not so anymore. Be glad, because now it is easier to get a Federal Housing Administration or FHA loan.
A report which has been published in the last week claims that throughout the year 2013, the average credit score required for an FHA loan has been constantly declining. The report also points out that the average values for the required debt to loan income ratio have also increased, which serves as another sign that lending qualifications have been somewhat relaxed.
Analyzing the past stats, it can be noted that the average credit score observed in January of the year 2013 was around 701 for FHA loans, and the debt to income ratio was around 38%. In January of 2014, the figures show a very clear decline with the average credit score falling down to 680. As for the ratio, that was noted at 40.3%.
One of the biggest lending agencies in the country has implemented new practices that confirm the same. Ever since the beginning of this year, they have been offering loans to clients whose credit scores are around 600. Previously, their lowest limit was 640, which is quite higher than this.
A representative of this lending agency told the press that they had already notified FHA about their decision regarding credit scores, and the FHA had no issues. He added that their company offers loans only when a written contract, clearly outlining all the terms of the loan has been signed by the borrowers. This is done when a borrower provides concrete evidence that they will be able to pay back the loan in the allotted time period.
As far as the rules are concerned, FHA loans can be given even when the credit scores of the borrowers are around 580. Lenders do not actually do this and have increased their standards ever since the financial crash took place. They back up their actions by stating that lower credit scores lead to issues like troubled mortgages and defaulted payments.
Now that the requirements have been relaxed, hopefully, more people can buy a home and fulfill their dreams of becoming a homeowner.