MyFICO.com defines the logic of credit scoring as being "predictive." That's why financial decision-makers for mortgage loans, credit cards, auto loans and other credit decisions rely on the credit scoring system: to predict the potential risk of a lending or credit-approval decision. A lower credit score "predicts" certain things about the Borrower's financial position in the world and the ability to repay debt.
While a 640 score may be sufficient to qualify for FHA Insured financing with many Lenders, I have some more practical advice for HomeBuyers today. I strongly recommend you review your finances, especially your credit, and take your time to prepare for the homeownership experience. Buying a home and taking on a mortgage loan is a HUGE step. If your credit scores are less than 680, you really need to get better prepared so that you don't find yourself in trouble soon after buying your home.
Folks with poor credit and insufficient financial standing who purchased homes during the BOOM got easy mortgage money, but look at what happened after the fact. The mortgage is your responsibility; prepare yourself with strong credit, sufficient savings, and consistent, reliable income before you consider buying a home.
Sure, there are zillions of mortgage people who'll volunteer to help you with financing now if your credit scores are lower than 680. Based on real world experience of 22+ years in this industry, I'd suggest those mortgage people aren't offering valuable assistance, only leading you to a potential financial disaster.
Think for a moment of some of the bravest people who live and work in our towns and cities in the United States: Firefighters. I have seen firefighters jump off a still-rolling fire truck and rush into a burning building. The incredible risk these brave people take is tempered by one important element: Training. When they're not putting their lives on the line for their communities, firefighters are training like Olympic Athletes. They train constantly for a simple reason: they need to prepare to run into burning buildings and to deal with the unkwown factors of a fire.
So, I ask you this: If the Bravest people in our communities, who put their lives on the line every day, wouldn't DARE think of running into a burning building without the proper training, why would someone who isn't prepared take on the daunting task of homeownership?
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