Obama administration pushes banks to make home loans to people with weaker credit

[Yo_Mama]

62. 650 is pretty bad

She needs to get that up over 680. Her score is significantly worse than average. More than 60% of Americans have scores over 700.

Perfect (top-line) scores are in the 800s. 700 scores are good. The national average score is 750 or thereabouts.

Banks aren't requiring PERFECT credit, but they aren't happy about giving high loan-to-value mortgages to those with scores less than 720. They're afraid they'll be forced to buy the loan back later and incur losses if there is a default, nor is it that saleable, so interest rate risk (duration risk) is a real factor.

FHA insurance guidelines are the minimum standard (unless you have a 20% downpayment, and who does?):
First you have debt-to-income ratios, explained here:
http://www.fha.com/fha_requirements_debt

If she really can meet the front-end and back-end ratio requirements, the next place to go is Fannie Mae's LLPA matrix:
https://www.fanniemae.com/content/pricing/llpa-matrix.pdf;jsessionid=C58479AC70FBAD660890880C7505E28E.cportal-cl03

Note that for a 90-95% loan to value ratio, (person is putting down more than 5% but no more than 10%), Fannie imposes a 1.5% interest rate increase for a person with a 650 score compared to a person with a 680 score. In other words, Fannie sees that much extra risk in that loan.

And if a person is putting down less than 5% (FHA), the cost actually drops to 1.25% extra.

You don't need perfect credit to get a mortgage, but you do need decent credit and some money down and not too much in the way of extra debt so that your back-end DTIs don't look too bad. A lot of people are unrealistic about what they can afford.