Fannie Mae Just Eliminated Its 620 Minimum Credit Score: What That Really Means for Homebuyers
On November 16, 2025, Fannie Mae removed one of the biggest roadblocks in conventional mortgage underwriting: the hard 620 minimum credit score in Desktop Underwriter (DU).
Prior to this update, if nobody on the loan application had at least a 620 score, DU would not give an automated approval. The response would be a “refer” from DU automatically no matter how strong the file.
But here is the key point most headlines miss: even though more buyers may get a conventional approval, low-score conventional loans can still be much more expensive than FHA once you factor in the interest rate and mortgage insurance. In many real-world cases, FHA will still give you a lower monthly payment, even if conventional technically “approves.”
This article breaks down what changed, what stayed the same, and how to choose between conventional and FHA if you are buying in Delaware, Maryland, or Pennsylvania. Interested in seeing your options now with this change? Call Loan Officer John Thomas at 302-703-0727 or APPLY ONLINE.
How Conventional Credit Scores Used To Work
Under Fannie Mae’s old DU rules:
- One borrower: the representative credit score had to be at least 620.
- Two or more borrowers: the average median score across borrowers had to be at least 620.
- Borrowers with 7–10 financed properties: usually needed a 720 score.
If you fell below those floors, the loan was simply not eligible for sale to Fannie Mae. Many buyers were turned away based on score alone before DU even evaluated the rest of the loan file.
For borrowers without traditional credit scores, there were broad requirements tied to the absence of a score, including nontraditional credit documentation and homebuyer education and most lenders will not manually underwrite a conventional loan which is required if not getting an “approve” response from DU.
What Changed on November 16, 2025
For new DU casefiles created on or after November 16, 2025, Fannie Mae made three big changes:
- The 620 minimum score requirement for DU is gone.
- DU no longer needs any minimum third-party credit score to run its risk assessment.
- DU now leans entirely on Fannie Mae’s internal risk models to decide if a loan is eligible.
Those internal models look at the details of your profile, not just a single number. DU considers things like:
- Past delinquencies and your recent payment history
- Credit card balances and utilization
- On-time rental history
- Trended credit data (how you’ve used credit over time)
- Reserves (money left in the bank after closing)
- Loan-to-value (LTV) and debt-to-income (DTI) ratios
Fannie Mae has used these models for more than 25 years and was one of the first to include trended credit data and positive rent payments in DU. This update simply removes the “must have 620+ to even try” rule and lets DU directly evaluate more files.
Fannie Mae has also said they expect only a modest change in how many loans get an Approve/Eligible result. So this is about fairness and removing artificial friction, not about opening the floodgates to risky lending.
What Stayed Exactly the Same
1. Lenders Still Pull Credit Scores
Even though DU no longer uses a minimum score as a gatekeeper, loans sold to Fannie Mae must still include a third-party credit score when they are delivered. DU just isn’t using that score as an automatic “yes or no” anymore.
2. Manually Underwritten Conventional Loans Still Have Minimum Scores
If a loan is manually underwritten instead of run through DU, Fannie Mae’s Selling Guide still sets minimum score requirements, often 620, with some exceptions for specialty programs.
3. Lender Overlays Still Exist
Individual lenders and investors can add their own rules on top of Fannie Mae’s. For Example, Not all lenders will lend below 620 for several different reasons even with the change. If a lender is not willing to service the loan, then their must be a loan servicer willing to buy Fannie Mae loans with credit scores below 620.
So even though Fannie Mae no longer has a DU minimum, some lenders still might and if putting down less than 20%, lenders must find a private mortgage insurance company that will go below 620.
4. FHA, VA, and USDA Did Not Change
This update only affects conventional loans sold to Fannie Mae. Government-backed programs still follow their own rules.
FHA Loans:
- Only 3.5% down with scores of 580+
- Only 10% Down with scores 500–579
VA Loans:
- No Minimum Required Credit Score for 0% down
USDA Loans:
- 600 minimum credit score for 0% down
These rules did not change when Fannie Mae updated DU.
New Rules for Borrowers Without Traditional Credit
Under the old system, if a borrower had no score, that alone triggered specific nontraditional credit and homebuyer education requirements.
Now, DU takes a more precise approach:
- DU issues a message when the lender must build a nontraditional credit history or require homebuyer education.
- That trigger is based on what is actually on the credit report, such as when no borrower has even one reported revolving or installment account.
For borrowers with no traditional credit at all, DU may require:
- A documented nontraditional credit profile (on-time rent, utilities, insurance, cell phone, etc.).
- Specific occupancy, property type, and reserve requirements, usually for owner-occupied one- to four-unit homes.
This is a real win for “thin file” buyers who pay their bills on time but have few or no traditional credit lines.
Is Conventional Suddenly Better Than FHA for Lower Scores?
This is where a lot of the online chatter goes off track.
Yes, DU can now approve some conventional loans for borrowers with scores below 620 if the overall file meets Fannie Mae’s risk standards. But there is a big difference between being approvable and being affordable.
Conventional Loans: Risk-Based Pricing
With conventional loans:
- The lower the score and the higher the LTV, the more you typically pay in interest rate and private mortgage insurance (PMI).
- PMI companies also charge more for lower scores and smaller down payments.
So a low-score conventional loan might “work,” but the total monthly payment can be very high once you add rate and PMI together.
FHA Loans: More Stable Mortgage Insurance Pricing
By contrast, FHA:
- Uses standard mortgage insurance premiums that do not swing as much with your credit score.
- Currently charges an annual mortgage insurance premium (MIP) of 0.55% for 30-year loans with less than 5% down, after a 2023 reduction from 0.85%.
Because FHA’s pricing is more stable, FHA often ends up cheaper on a month-to-month basis for buyers with lower scores.
Real-World Payment Comparison
Here is a simple example that mirrors actual pricing scenarios seen by the John Thomas Team:
- Purchase price: $274,900
- Loan amount: $269,920
Conventional Example (Lower Credit Score)
- Credit Score 620
- LTV 97%
- Conventional monthly mortgage insurance factor: 1.86%
- Monthly PMI: about $411.18
FHA Example on the Same Property
- Credit Score – 620
- LTV – 96.5%
- FHA annual MIP factor: 0.55%
- Monthly MIP: about $120.94
Same home. Similar loan amount. Very different mortgage insurance cost.
On top of that, conventional interest rates for lower scores are higher than FHA rates because conventional pricing is more sensitive to credit risk.
So even if DU says “Approve/Eligible” on a conventional loan, the FHA option may still produce a lower total payment, especially for buyers with lower credit scores and smaller down payments.
FHA does charge an upfront mortgage insurance premium (UFMIP) of 1.75% of the base loan amount, which is usually financed into the loan. But even after including that, many lower-score buyers still see FHA come out ahead on total monthly payment.
This is why a smart loan strategy never starts with “Can we do conventional?” The better question is: “Which program gives the best mix of approval odds and total monthly payment for this specific buyer?”
Who Benefits Most From the DU Changes?
From a practical standpoint, these groups stand to gain the most from Fannie Mae’s DU update:
1. Borrowers Just Under 620
Buyers with scores just below 620 who were previously blocked by the hard cutoff now at least get a full DU review, if the rest of their profile is strong enough (solid income, good recent payment history, some reserves). But if putting down less than 20% must be able to get mortgage insurance from a private mortgage insurance company with score below 620.
2. “Thin File” Borrowers
People with few traditional credit accounts but excellent rent and utility history can now be evaluated more fairly. DU’s rules around nontraditional credit are now tied to what is actually missing on the report, not just whether a score shows up.
3. Borrowers With Older Credit Problems
Borrowers whose scores are still weighed down by older issues, but whose last 12–24 months show clear improvement, may see more accurate risk assessments and a better chance at DU approval.
Hard credit score cutoffs have also been shown to hit communities of color and households with less access to traditional credit more often. Moving away from those hard lines, and toward a full risk-based analysis, is a step toward more equitable access to conventional financing.
Important Trade-Offs to Remember
Even though these changes are positive, buyers should understand a few key trade-offs:
- Conventional PMI can be removed once you reach enough equity. FHA MIP often lasts for the life of the loan if you put down less than 10%.
- FHA is often cheaper upfront for lower scores, but many buyers later refinance into a conventional loan when their credit and equity improve to remove FHA MIP.
- Lender overlays still exist. Some lenders will continue to require certain minimum scores or stricter rules than Fannie Mae’s baseline.
- A DU “Approve/Eligible” is not a guaranteed closing. Income, assets, and the property itself still have to be fully documented and meet all guidelines.
This is why clicking a simple “Conventional vs FHA” checkbox on an online calculator can be risky. The right answer depends on:
- Your credit score and credit history
- Your down payment and reserves
- Your income and debt-to-income ratio
- How long you plan to keep the loan
What This Means for Buyers in Delaware, Maryland, and Pennsylvania
For buyers in Delaware, Maryland, and Pennsylvania with scores under 620, the old mindset was often:
“I guess I’ll never qualify for a conventional loan.”
With the new DU rules, that is no longer automatically true. Some borrowers under 620 may now qualify for conventional financing if their overall profile is strong enough.
But that does not mean conventional will always be the best financial choice.
The smarter question is: “Which loan program gives the best chance of approval and the lowest overall payment for my situation?”
For many first-time buyers in this region—especially those with lower scores, smaller down payments, and limited reserves—FHA still often wins on monthly affordability. In other situations, a conventional loan with slightly higher PMI but the ability to remove it later may make more sense.
There is no one-size-fits-all answer. The only way to know is to run your numbers side by side.
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