The bank is now shifting focus from a high scredit score to a larger down payment requirement & a lower debt-to-income ratio. Now, an FHA borrower who comes up with a minimum 10% down payment & has a maximum debt-to-income ratio of 31% can qualify for a loan if their credit score is over 500.
It seems that this may be related to the administration's housing report, which discussed a need for higher down payments & discussed establishing more federal oversight of credit scores. Regardless, the key takeway is that the bank cares more about how much the borrower has to lose if they do not pay their mortgage and how much money they have available to pay their mortgage, rather than what the borrower's previous borrowing habits indicate.
To learn more about Wells' new move, click here.