Remarkably, Fannie Mae has officially removed the minimum FICO requirement of 620 for Desktop Underwriter (DU) submissionsaligning their approach with Freddie Mac’s LPA from November 15. Approvals are now determined entirely by the DU/LPA findings rather than based on a hard credit score. Strong compensating factors have the biggest impact on obtaining A/E findings, e.g. larger down payments, shorter terms, excess assets, etc.
Within the first week, several leading national lenders reported the following:
- Many approved applications came in with it under-620 FICOs – approximately 6% of total application volume –of some as low as 490.
- Several brokers have already begun reevaluating their fallout stocks from the past 60 to 180 days, discovering early wins among customers who had previously fallen due to credit.
The minimum credit score requirement of 620 – both for individual borrowers and the average median score for multiple borrowers – was eliminated for new loan files created on or after November 16, 2025.
Why is this important to investors?
The Trump administration is making a concentrated effort to ease credit and make borrowing more accessible and affordable.
Another example of increasing affordability is Mortgages with a term of 50 years And, maybe more importantmortgage portability. There are active discussions on how to enable this homeowners to take their mortgages with them, similar to how consumers can port their cell phone numbers from carrier to carrier. The plan moves with them instead of the mortgage that remains with the home.
This is a new idea that could have a major impact on inventory. It is estimated that a third of US borrowers have mortgages below 4%, creating a “lock-in” effect, with inventory constraints further down the chain.
Allowing borrowers to transfer their low-interest, pandemic-era mortgages to a smaller or larger property would likely increase transaction activity while easing pricing pressure in some regions.
Conversely, there are many considerations about how these programs would be implementedand whether they would actually level the market or shift preference towards people with lower mortgage rates.
In the scale-up scenario, there are guidelines should are set for the type of property. Can a primary mortgage be transferred to an investment property? maybe after one Certainly period? And if the current loan balance was insufficient to cover the down payment difference on the purchase, will a second lien program be introduced at more favorable rates? Otherwise, if the spread is wide enough, the blended rate could actually be higher than that of a new conventional loan, albeit with the possibility of longer amortization.
From the lender’s and servicer’s perspective, mortgage bonds are much more likely to be held to maturity, which could impact interest rates or loan costs. And new guidelines would be introduced for a new class of borrowers.
What to do now
Real estate investors should pay particular attention to developments in mortgage markets leading up to and through 2026, as any major revision to “business as usual” could provide tight opportunities to implement them. Think of when interest rates hit rock bottom during the pandemic, or the recently reintroduced 100% interest rate. bonus depreciation for qualification and participation short term rental acquisitions.
Anyone who is on the qualifying FICO fence, or who was recently rejected for conventional loan programs as a result of credit score, including FHA programs, should contact their lender for an updated prequalification or approval letter.
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