Big News for Washington Homebuyers: Fannie Mae Removes the 620 FICO Floor — And It Could Change Everything

Hello friends — Joana here.

Every once in a while, the mortgage world shifts in a way that doesn’t just adjust the rules… it redefines who gets a chance at homeownership. And this week, we’re witnessing one of those moments.

Fannie Mae has officially removed the long-standing 620 minimum FICO requirement for conventional loans run through Desktop Underwriter® (DU). No more one-size-fits-all threshold. No more “620 or you’re out.”

Instead, DU will evaluate borrowers based on their full financial story — not just a single number.

This change went live for all new loan case files beginning November 16, 2025, but the ripple effects start now.

Why This Matters (More Than You Think)

Let’s be honest: a single credit score has held disproportionate power over people’s lives. It’s stopped responsible renters from buying. It’s punished people for medical emergencies. It’s shut out new graduates and new arrivals to the U.S. long before they ever had a chance to build credit.

So here’s what this update really does:

1. It promotes fairness.

DU will now consider payment history, cash flow patterns, credit depth, past hardships, and recovery — a true “credit transcript,” not just the GPA.

2. It helps people with thin credit files.

Think of recent UW grads, Boeing interns, healthcare workers who prefer debit, or new immigrants relocating to Washington’s tech corridor. These are responsible borrowers who simply lack long-standing credit histories.

3. It acknowledges that life happens.

Even a single medical collection or financial setback shouldn’t define your financial identity forever.

A Quick Story to Put This in Perspective

Meet Leslie.

She has a 612 credit score—not because she overspent or was irresponsible, but because her credit history is relatively thin and she is still paying down a larger medical collection from a few years ago. She has been making payments on her balance, but it still weighs on her score.

Even with steady income and strong rent and utility payment history, the old 620 minimum would have limited her options for a conventional loan.

Under the new Fannie Mae rules? Her full financial picture finally matters. DU evaluates income stability, debt-to-income ratio, payment behavior, and cash reserves—not just a single number—giving her a real path to homeownership.

How to Take Advantage: Strengthening Your Compensating Factors

Compensating factors are elements of your financial profile that make lenders more comfortable extending a loan — things like low debt-to-income (DTI), steady income, cash reserves, and a larger down payment.

1. Larger Down Payment & Stronger Application

A bigger down payment directly lowers lender risk and strengthens your compensating factors, making your application more appealing under DU’s holistic review.

Covenant Homeownership Program (CHP) & Other DPA Programs For many first-time buyers, CHP and other down payment assistance (DPA) programs can front the down payment or forgive it entirely under certain circumstances, allowing you to keep cash reserves after closing instead of tying up your own funds. These programs effectively strengthen your application while making homeownership more attainable.

2. Other Ways to Compensate

• Maintain a low DTI ratio

• Document 12–24 months of on-time rent, utilities, and other non-traditional payments

• Keep additional cash reserves after closing

• Continue improving your credit score
  

The Bigger Picture: What This Means for Washington State

This change could reshape homeownership patterns in our region:

• More first-time buyers may enter the market, especially those who rely on consistent rent payments rather than credit cards.
  

• Programs like CHP or other DPA options make homeownership more attainable, especially when combined with DU’s holistic approach.
  

• Fewer borrowers may need FHA loans which could give some buyers access to conventional financing — though MI rates on conventional loans will depend on credit score and down payment, and may be higher or lower than FHA depending on individual circumstances.
  

• Competition could increase at price points under $600K — something our tight inventory will absolutely feel.
  

And there’s an added layer of urgency: Washington’s housing inventory is already tight, and competition is high. If a 50-year mortgage were introduced, more buyers could qualify and enter the market, further straining limited inventory and intensifying competition. This could also shift interest rates, home prices, and borrowing dynamics, potentially making homes more expensive or altering monthly payment structures. Acting early under these new Fannie Mae guidelines gives buyers a chance to secure favorable terms before additional buyers enter the market and competition rises even more.

This isn’t just a mortgage rule update. It’s a window of opportunity — and like all windows, it will favor those who move early and strategically.

Joana’s Advice: How to Make This Work for You

If your credit score is below 620 — or barely above it — here’s how to position yourself for success:

1. Choose your lender carefully. Some lenders fully embrace the new Fannie Mae rules, while others may apply “overlays”—additional requirements on top of Fannie Mae guidelines, like a higher minimum credit score or stricter debt-to-income limits. Shopping around ensures you find a lender aligned with DU’s flexible approach.
   

2. Leverage compensating factors: Bigger down payment (using CHP and other DPA programs as applicable), low DTI, steady employment, and cash reserves.
   

3. Document non-traditional credit: Rent, utilities, phone, and childcare payments can all strengthen your application.
   

4. Improve your credit score: This new flexibility is a boost — not a free pass. A higher score still means lower rates and stronger negotiating power.
   

A Final Question to Leave You With

If your financial story is more than just a number — and it is — isn’t it time lenders recognized the full picture?

This change is a major step toward that future.

If you’re curious whether you could qualify under these new rules — or want to explore programs like CHP or other DPA options that could make your down payment easier — reach out any time. Your future home might be closer than you think.

Happy house hunting!— Joana Evans