In the United States, millions of peoples are not able to get a mortgage because their credit score is too low. The Federal Housing Administration (FHA) is working to change that and expand access to home loans. Through a network of about 900 lenders, the FHA offers loans, typically to low-income families.

How can the FHA offer mortgages to more Americans, including young Americans?

A recent study showed that pre-loan housing counseling reduced the default rate during the first two years of a mortgage by one-third. Consequently, the FHA has decided to offer people who have credit scores less than 640 a mortgage without taking a huge financial risk if the applicants participated in housing counseling according to a recent edition of the New York Times. This type of financial counseling can be done individually or in groups, but must be a government-approved provider. Traditionally, a credit score of 640 or less would be enough to deny a mortgage application. The FHA is now allowing people with scores 60 points lower—580—to get a home mortgage.

In addition to making a borrower less likely to default, a housing counseling class can save borrower’s money. The FHA would lower its borrowers’ insurance premiums by 0.5% from the start if they took a housing counseling class. After that, the FHA would lower the borrower’s annual insurance premium by 0.1%. If the borrower took “post-closing counseling” and made timely payments for two years, then the FHA will shave off 0.15% of the rate of the borrower’s annual insurance premium. These numbers may sound small, but on a $180,000 30-year mortgage, this may add up to nearly $10,000 in savings. The FHA is pushing banks to lower their credit score requirement for borrowers that go through housing counseling because it will expand home ownership, make mortgages more affordable and make banks less likely to deal with costly defaults and foreclosure processes.

If you are considering filing for bankruptcy, or purchasing a home then you should speak with an experienced attorney. Jayson Lutzky is a Bronx, New York lawyer with over 31 years of experience helping clients in the local community. He has helped many satisfied clients successfully file for personal bankruptcy over the years and offers free in-person initial consultations. Call 718-514-6619 to set up a no-obligation, confidential appointment. Visit to learn more about bankruptcy.