Fannie Mae Drops the 620 Minimum Credit Score Requirement: What Homebuyers Need to Know

A major shift in the mortgage landscape is officially underway: Fannie Mae has eliminated its long-standing minimum 620 credit score requirement for loan eligibility. This update opens the door for more borrowers—particularly those with limited or non-traditional credit histories—to be evaluated for home financing.

But with big policy changes come big questions. Does this make it easier to qualify? Does it lower standards? And how will lenders actually determine who gets approved?

Here’s a clear breakdown of what changed, why it matters, how Desktop Underwriter works, and the key pros and cons buyers should understand.

What Exactly Changed?

Until now, borrowers needed at least a 620 middle credit score to be evaluated for a conventional loan through Fannie Mae. Anyone at 619 or below was automatically ineligible—regardless of their financial strength.

With the new update:

• The 620 minimum score requirement is gone

• Borrowers with scores under 620 can now be reviewed normally

• Approval is not guaranteed—eligibility simply becomes possible

This change broadens access, but it doesn’t automatically approve borrowers with low scores. Risk evaluation still happens through Desktop Underwriter.

Why Fannie Mae Made This Change

Two primary factors drove this update:

1. Expanding Access to Homeownership

Many financially capable buyers lack traditional credit histories. This includes individuals who:

• Avoid credit cards by preference

• Rely on debit or cash-based systems

• Are new to the United States and still building U.S. credit

• Have thin or limited credit profiles

Removing the score cutoff gives these borrowers a fairer opportunity.

2. Reducing Inequities in Credit Scoring

Research has long shown that traditional scoring models can disproportionately affect certain demographic groups. Eliminating the 620 barrier helps reduce built-in bias and expands fair access to mortgage lending.

A Quick Explainer: What Is Desktop Underwriter (DU)?

Desktop Underwriter—commonly called “DU”—is Fannie Mae’s automated underwriting system. It evaluates risk and issues a recommendation such as “Approve,” “Eligible,” or “Refer.”

Here’s what surprises many people:

DU does not use credit scores to calculate risk.

Instead, it evaluates the borrower’s full financial picture, including:

• Cash reserves

• Total debt levels

• Payment history patterns

• Job and income stability

• Loan purpose

• Property type

The previous 620 rule wasn’t part of DU’s risk model; it simply blocked borrowers from even being reviewed. Removing that barrier allows DU to assess borrowers more holistically.

Does This Mean Low Credit Scores Are Suddenly Approved?

No.
A low credit score may allow the file to be reviewed—but DU still requires strong financial fundamentals.

Borrowers with:

• High debt-to-income ratios

• Recent late payments

• Unstable employment

• Insufficient reserves

…can still be denied. The change only affects eligibility for review, not the outcome of approval.

PMI Guidelines Are Changing Too

Private mortgage insurance (PMI) companies are responding with their own updates. One significant shift: some PMI providers now allow blended credit scores for joint borrowers.

Traditionally, the lower of two credit scores dictated the mortgage insurance rate, which often penalized couples when one spouse had stronger credit. Blended scoring can ease that burden and improve affordability.

Not all PMI companies have adopted this yet, but industry momentum is clearly moving in this direction.

The Pros of Removing the 620 Minimum

Pro #1 — More Buyers Can Be Evaluated

This update expands access for buyers sitting just below the 620 mark. Homeownership is one of the most powerful tools for long-term financial stability and generational wealth, and more borrowers now have the opportunity to be considered.

Pro #2 — DU’s Holistic Review Is More Accurate

DU looks at a borrower’s entire financial profile—not just a single score.
This benefits:

• Buyers who avoid credit cards

• Individuals with non-traditional credit

• New immigrants with limited U.S. credit

• Buyers who have cash reserves but thin credit histories

A broader review often paints a more accurate picture of true creditworthiness.

Pro #3 — Reduces Bias from Traditional Credit Models

Traditional credit scoring systems have known inequities. Removing the rigid score cutoff helps reduce systemic barriers and promotes fairer access to mortgage financing.

The Cons Buyers Should Understand

Con #1 — Low Credit Scores Still Increase Costs

The removal of the 620 rule does not eliminate the financial consequences of low scores. Borrowers with lower credit typically face:

• Higher interest rates

• Higher PMI premiums

• Lower affordability overall

Zero-down or low-score loans often come with steep costs.

Con #2 — Housing Supply May Not Keep Up

Inventory remains historically low across much of the country. More qualified buyers entering the market can place additional pressure on supply, which can contribute to rising prices.

Con #3 — Concerns About Past Lending Crises

Some consumers worry that loosening credit restrictions could echo the conditions leading up to the 2007 housing crisis.
However, today’s lending environment includes far stronger:

• Verifications

• Regulations

• Income checks

• Safeguards against risky approvals

Lower barriers do not mean lower standards.

Con #4 — Lenders May Add Their Own Minimums

Even though Fannie Mae no longer requires 620, individual lenders still can.
Many lenders set internal “overlays” to reduce risk, which may include:

• Their own minimum scores

• Additional documentation

• Extra approval steps

This can be confusing for borrowers, especially when using quick online pre-qualification tools that don't fully assess eligibility.

Bottom Line

Fannie Mae’s removal of the 620 minimum credit score doesn’t relax lending standards—it simply removes an outdated gatekeeping rule. Eligible borrowers with strong financial foundations now have the opportunity to be evaluated more fairly, even if their credit score is below 620.

For many Americans, access to homeownership is a pathway to stability, security, and long-term wealth. This update is a meaningful step toward expanding that opportunity.

Buyers who are unsure how these new guidelines apply to their situation should consult a trusted real estate professional or lender for a personalized assessment.

Check out the Market update video with Angela and Michele!