In a significant pivot aimed at enhancing home accessibility, Fannie Mae has officially abolished the 620 minimum FICO score requirement for its Desktop Underwriter (DU) submissions. This decision aligns with Freddie Mac’s Loan Product Advisor (LPA) system and took effect on November 15. Moving forward, loan approvals will rely on comprehensive findings from DU or LPA, rather than a rigid credit score threshold.
This groundbreaking shift is expected to reshape the lending landscape, particularly benefiting individuals and families who previously found themselves on the wrong side of the credit score divide. By emphasizing strong compensating factors—such as substantial down payments, shorter loan terms, and ample asset reserves—borrowers may now gain increased consideration, even with credit scores falling below the former cutoff.
New opportunities for borrowers
With the elimination of the 620 credit score barrier, many national lenders reported a surge in potential applicants within the first week following this change. For loan casefiles submitted or created after November 16, borrowers no longer face automatic denial due to scores below this threshold.
Lenders will now conduct a more holistic evaluation of each borrower’s financial profile. Individuals with a credit score around 590 or 600, but who possess a steady income, low debt-to-income (DTI) ratios, and a positive payment history, might still qualify for conventional loans. This change is particularly crucial for first-time buyers and younger individuals who often have shorter credit histories.
Impact on housing market dynamics
The implications of this policy shift extend beyond individual borrowers; it may also influence the broader housing market. The introduction of 50-year mortgages and the innovative concept of mortgage portability are currently under discussion. This would allow homeowners to transfer their existing mortgage rates when moving to a new property, similar to how individuals can retain their phone numbers across different carriers.
Such a strategy could stimulate housing transactions by alleviating the so-called lock-in effect, which currently affects approximately one-third of U.S. homeowners with mortgages below 4%. If these borrowers can port their favorable rates to new properties, it is anticipated that housing inventory will increase, thus relieving price pressures in various markets.
Considerations for lenders and borrowers
While the removal of the credit score minimum opens numerous doors, it also brings forth several considerations. Lenders may still impose their own internal guidelines or overlays, which could require a minimum score closer to 620, depending on their specific policies or the type of mortgage insurance involved. Consequently, those with lower credit scores may still encounter higher interest rates or additional fees.
It is essential to recognize that a lower credit score does not automatically guarantee loan approval. Other vital factors will continue to play a crucial role in the underwriting process, including the debt-to-income (DTI) ratio, loan-to-value (LTV) ratio, and the applicant’s overall credit history. Elements such as late payments, delinquencies, and financial stability will still weigh heavily on lending decisions.
Advice for potential borrowers
For those who may have been discouraged by previous lending criteria, now is the time to reassess your financial profile. Homebuyers who were once told they didn’t qualify due to a subpar credit score should reach out to their lenders for a reevaluation based on the latest updates. Collecting documentation of consistent payment habits, savings, and other financial assets can bolster your application.
As the mortgage landscape evolves, particularly leading into 2026, real estate investors and potential homeowners alike should stay informed of these changes. Opportunities may arise similar to those seen during the pandemic’s low-interest rates or the reintroduction of attractive tax benefits for short-term rental investments.
This groundbreaking shift is expected to reshape the lending landscape, particularly benefiting individuals and families who previously found themselves on the wrong side of the credit score divide. By emphasizing strong compensating factors—such as substantial down payments, shorter loan terms, and ample asset reserves—borrowers may now gain increased consideration, even with credit scores falling below the former cutoff.0