Although FHA has been proud to say their program is not score driven, the bond market/banks that lend you the money have made the interest rate you receive based on the middle of your 3 scores (not the average!). 620+,600-619,580-599 and 579-down are usually the basic catagories. Beginning next month the rate and amount of Monthly Mortgage Insurance on an FHA loan will be tied to your credit score.
The ratios that are important to an approval are the housing/income (estimated payment with taxes and ins. and MMI as % of gross monthly income) and total debt/income (housing plus minimum payments of other debt as % of gross monthly income). These need to be around 30% and 45% and your credit history will affect how high they can be.
A pre-approval is not a sure thing. Be sure the person supplying the information has all of your credit, employment and income history and can document everything before taking further action. A turn-down a week before closing is the worst thing that can happen and there are no sub-prime lenders to turn to.
If you don't have 10% or more in the bank, I think a Down Payment Assistance program is a good way to save cash . As a home owner you will discover needs for lawn mowers, paint and furniture, etc. that you do not want to end up on credit cards that first year or so. These things cost the same whether your buying a $75,000 or $300,000 home.
Ameristar Mortgage is your local Wisconsin mortgage broker:
Local: (608) 242-0826 x23
Toll Free: (877) 240-5840
Visit my blog at http://www.ameristarmadison.com/blog/