In reality Fannie Mae and Freddie Mac have not changed their credit score requirements as most people do not know the rules around credit scores with conventional loans which has changed over the past year.

If you were to ask a majority of loan officers what is the minimum credit score for conventional loans the answer would likely be 620.

Part of that is true but how you get to that number can be vastly different.

Freddie Mac no longer has a minimum score. They will accept any credit score that receives an accepted response through automated underwriting. They factor their Accept or Refer response into the overall credit assessment. This is very similar to how they view major derogatory events.

Freddie does not have waiting periods on many of their derogatory requirements but instead uses the overall credit assessment.

Fannie Mae on the other hand does have a minimum credit score of 620 but they calculate it differently than just using the middle score or lower of two middle scores to come up with the 620.

On a single borrower transaction Fannie does use the middle score as the score that must be 620 or better to qualify.

BUT, when you have two borrowers it is the median average. This is what I mean by that.

1 Borrower

580 – 615 -645

615 is the score used. 

2 Borrowers

#1 – 640 – 650 – 692

#2 – 580 – 684 – 720

You take the two middle scores

650 & 684

Then add them and divide by 2

650+684=1334 divided by 2 = 667

667 is the score used for min score requirements

2 Borrowers

#1 – 615 – 660

#2 – 610 – 625 – 653

Take lower of two plus middle and add

615+625=1240 / 2 = 620

620 is score used

VERY IMPORTANT

The above calculations are only to determine if they qualify for the minimum score requirement. The lower of the two middle scores when multiple borrowers will still be used for MI requirements, pricing and LLPA adjustments.

The purpose with Fannie was to allow more borrowers to be eligible for financing when one borrower has a substantially lower score. Then the other borrower can bring the average up.

As an FYI We do allow borrowers with no score loans on conventional loans.

In addition, HomeReady, HomePossible and Fannie First Time HomeBuyer products do not have loan level price adjustments for items like low scores which means if eligible it could be the right product to use.