With all the scary press that the mortgage industry has received over the past three years it is no wonder that lenders have been wary of loosening guidelines. Up until recently it was extremely difficult to find FHA financing if your middle credit score was below a 640 and if you didn’t have 20% to put down you could forget about conventional financing unless you were above a 680 score. This past week I have received several announcements from many of my lenders reducing their credit score requirements by 20 points on both FHA and conventional loans. So now, if you are a 620 score you can qualify for pretty much all of the government financing available through FHA, VA or USDA and if you are a 660 and above you qualify for conventional with as little as 5% down.

I know that 20 points doesn’t sound like much but in America it is estimated that over 20 million Americans are between a 620 and 640 credit score so how about that for adding to the potential pool of buyers! I understood why lenders kept tightening and tightening during the middle of the credit crunch of 2008 and 2009 but I also knew that it was counterproductive for the economy as a whole. The fewer potential buyers there are for more and more homes hitting the market means ever reducing home prices which means even more foreclosures and even more homes hitting the market. It is a slippery slope we are on right now but, hopefully, with this recent change we can start to climb our way out of this housing debacle we’re all in.