Fannie Mae's Game-Changer: No More 620 Minimum Credit Score Requirement for Loans

Fannie Mae has made a significant change that could open the door to homeownership for many people who previously faced barriers. Starting November 16, 2025, Fannie Mae will eliminate the minimum 620 credit score requirement for loans processed through its Desktop Underwriter (DU) system. This means that instead of relying on a single credit score cutoff, Fannie Mae will evaluate a borrower's entire financial situation. This shift could help more people qualify for conventional mortgages, especially those with lower credit scores but strong financial profiles.

Fannie Mae removing the 620 credit score minimum opens new home buying opportunities

What Changed with Fannie Mae’s Credit Score Policy?

Previously, Fannie Mae required borrowers to have at least a 620 FICO score to qualify for conventional loans through the DU system. This hard cutoff automatically disqualified anyone below that threshold, regardless of other financial strengths. Now, Fannie Mae has removed this barrier. The DU system will no longer use the 620 minimum as a strict rule. Instead, it will apply its own risk models to assess the borrower's overall financial health.

This means the focus has shifted from a single number to a more comprehensive view of the borrower's ability to repay the loan. The new approach considers factors such as:

• Income stability and sources

• Available assets and cash reserves

• Debt-to-income ratio (DTI)

• Payment history, including rent payments and other bills

  
  

By looking at the full financial picture, DU can approve borrowers with credit scores even in the 500 to 590 range if they demonstrate strong compensating factors.

How This Affects Borrowers with Lower Credit Scores

This change is especially important for people who have struggled to maintain a high credit score but have other financial strengths. For example, a borrower with a credit score of 580 but a steady income, a large down payment, and a history of on-time rent payments might now qualify for a conventional mortgage.

Here are some examples of compensating factors that can help:

• Large down payment (20% or more)

• Significant cash reserves or savings

• Low debt-to-income ratio

• Consistent payment history on rent, utilities, or other loans

  
  

This flexibility means more people can access conventional loans without turning to riskier or more expensive loan options.

What Borrowers Should Know About Credit and Approval

While the minimum credit score requirement is gone, credit still matters. Lenders will look closely at how borrowers manage their credit, not just the score itself. This means:

• Making payments on time remains crucial

• Keeping credit card balances low helps

• Avoiding recent bankruptcies or foreclosures improves chances

  
  

Lenders will also have their own guidelines. Even though Fannie Mae removed the 620 minimum, individual lenders can still require higher credit scores based on their risk tolerance. It’s important to shop around and talk to multiple lenders to find the best fit.

Benefits of the New Approach for Homebuyers

This change makes conventional loans more accessible to a wider range of buyers. Some benefits include:

• More opportunities for first-time homebuyers with credit challenges

• Ability to use rent payment history as a positive factor

• Greater chances for buyers with strong finances but lower credit scores

• Potentially lower interest rates compared to alternative loan types

  
  

For many, this could mean finally qualifying for a mortgage and achieving homeownership.

What This Means for the Housing Market

By removing the strict credit score cutoff, Fannie Mae is helping to expand the pool of eligible borrowers. This could lead to:

• Increased home sales as more buyers qualify

• Greater diversity in the types of borrowers obtaining loans

• More stability in the housing market with responsible lending practices

  
  

Lenders will still evaluate risk carefully, but this broader approach supports financial inclusion without sacrificing loan quality.

How to Prepare for Applying Under the New Rules

If you have a credit score below 620 and want to apply for a conventional mortgage after November 16, 2025, here are some steps to take:

• Gather documentation of income, assets, and payment history

• Work on improving your credit habits, such as paying bills on time

• Save for a larger down payment or build cash reserves

• Talk to lenders early to understand their specific requirements

  
  

Being prepared with a strong overall financial profile will improve your chances of approval.

Final Thoughts

Fannie Mae’s decision to eliminate the minimum 620 credit score requirement marks a major shift in how conventional loans are evaluated. By focusing on the whole financial picture, more people with lower credit scores but solid finances can qualify for mortgages. This change opens new doors for homebuyers who were previously shut out by rigid credit score rules.

If you were denied a loan before because of your credit score, now is a good time to revisit your options. Talk to lenders, gather your financial documents, and explore how this new approach could help you achieve your homeownership goals. Call us, we will help you figure it out: ATL 770.981.1999; Nola 504.365.7325 http://danetteoneal.com