In fact National Mortgage News reports that the average minimum FICO score for the 15 lenders with the lowest minimums in fourth quarter 2013 was 571, down from 599 one year ago.
Lenders are aiming principally at two market segments - young first time home buyers and former owners who were wiped out in the market collapse. Why? two forces seem to be driving the softening of the lending standards: A shrinking pool of new loan applications and rising costs associated with adaptation of the new QM (qualified mortgage) regulations. In other words, some lenders adapting to the standards imposed so that they would underwrite loans more stringently want to cover their costs by making loans to lesser qualified borrowers!
VA & FHA backed loans will still allow for very low downpayments, but in the private markets, borrowers should expect to pay interest rates as high as 8-10% and have down payments of 25-30% of the purchase price.