Historically FHA loans have had more lenient qualifying standards compared to their Government counterparts Fannie and Freddie but with more stringent paperwork and appraisal requirements, they weren’t too popular.

With the subprime meltdown and the tightening credit standards of Fannie Mae in addition to the heavy pricing adjustments, FHA popularity has skyrocketed.  Many believe that FHA had a hand in the mortgage crisis meltdown due to the fact they had really no minimum score requirements (all the way down to 500 was allowed).  Borrowers with 500 credit scores were still getting approved for 97% financing of a primary residence.  And even then, Down Payment Assistance programs effectively turned this into 100% financing.

Now, it seems the opposite extreme is happening.  One major lender recently made it even harder for consumers to qualify for FHA financing by increasing their minimum credit score from 620 to 640.  It’s not uncommon to see other lenders follow when they see a major lender make a move like this.