Unlike conventional lending, for decades FHA has maintained their philosophy of underwriting without credit score requirements. The Federal Housing Administration developed loan underwriting guidelines that considered each borrowers situation rather than making a decision solely on a credit score. As FHA loan defaults rose over the last five years, FHA finally caved to pressure and implemented credit score based guidelines. Most of the FHA credit score requirements were still more flexible than conventional underwriting. Some of the changes sought to solidify the fairness of the loan process. Many insiders simply said that HUD was just modernizing the FHA mortgage loan programs in an effort to reduce delinquencies and minimize the foreclosures.

Because of new laws passed by Congress, FHA loan and credit score requirements needed to be updated. Truth be told, most lenders had already implemented a minimum credit score for FHA home loans years ago. So even though FHA had no minimum credit score, loan companies were already tightening the FHA guidelines so the new FHA rules would actually make little difference to the borrowers.

The new FHA credit guidelines officially went into effect September 3, 2010. HUD implemented the new rules with modified guidelines with minimum credit scores that were specified for the first time to borrowers seeking a FHA mortgage. FHA minimum credit score requirements dictated that borrowers have a credit score of 580 or better for most of the FHA loan programs. Borrowers who had credit scores between 500 and 579 would be limited to 90% LTV, rather than 96.5%. Borrowers who had credit scores below 500 would not be eligible for FHA home loans.

However, HUD says that FHA would continue to make exceptions for borrowers with a "non-traditional credit history or insufficient credit."

Yes there have been changes to FHA requirements and FHA credit guidelines, but for borrowers with less than perfect credit, FHA loans continue to be a good opportunity for new homebuyers or distressed homeowners that have some negative issues on their credit report. The bottom line is that just because there are new FHA credit score requirements, doesn't mean that you won't qualify for a great FHA mortgage rate on a loan that is insured by the U.S. government.