This site is not authorized by the New York State Department of Financial Services. Other restrictions and limitations may apply. All products are subject to credit and property approval. Information, rates and programs are subject to change without notice. (877) 699-0353 or is not an offer to enter into an agreement. Even if you’ve been denied in the past, you may receive an approval under new rules.įor licensing information, go to: įairway Independent Mortgage Corporation NMLS # 2289 Can you buy a home under new rules?įannie Mae’s announcement is a huge change for approval standards. This is especially helpful when the lower-credit borrower makes most of the money.Įligibility score: 590 (disqualifies co-borrower)Įligible income: $25,000 (high-credit borrower only)Īs long as one borrower’s score is high enough, they have a chance to apply and use total household income. This change will allow applicants with sub-620 scores to be added to the loan in some cases, allowing the lender to consider their income. With high real estate prices in many areas of the U.S., it’s difficult to be approved for a loan on a single income. The high-credit borrower would have to qualify using their salary alone. There is one common solution: remove the low-credit borrower from the loan. The lender still used their co-borrower’s score to determine eligibility. Under old rules, it didn’t matter how high the perfect borrower’s credit score was. One may have made mistakes in the past while the other has pristine credit. In many cases, co-borrowers have vastly different credit profiles. Related: Biden-Harris Administration to Expand Access to Affordable Housing: Foreclosures, Manufactured Homes, 2-4 Unit Properties How the new credit score rule will help dual-income households

This new rule is specifically for eligibility, i.e. Neither will mortgage insurance be cheaper. That being said, Fannie Mae states that “credit scores are not an integral part of DU’s risk assessment,” DU being its underwriting algorithm.īut the new rule does give sub-620-score applicants a chance at approval, something that was not the case before.Īdditionally, the lender won’t give you a better interest rate based on the higher average score. Fannie Mae will still use the lowest middle score of any borrower on the loan to make an approved/not approved decision. The higher average score itself will not help you be approved for the loan. One important note is that the “average middle score” will only be used to tell the lender if you meet the 620 minimum credit score requirement to be considered for the loan.

The average would bump this borrower pair from “ineligible” to “eligible.” The change will not improve your mortgage rate or improve chances of approval

In the below scenario, the lender can use the average of the two middle scores instead of the lower one to determine eligibility for a Fannie Mae conventional loan. Lenders use the borrowers’ “middle score” based on the three scores they receive from credit bureaus. In this case, the average score would be 665, raising the couple’s average above the 620 minimum. Under new rules, the lender can average the two scores together for eligibility purposes. Two co-borrowers with scores of 720 and 610 were not eligible to buy or refinance a home together. So, for instance, if you are buying a house when one spouse has bad credit, it can be a problem. In the past, the agency told lenders that it must use the lowest score of any borrower to meet that minimum. How the credit score rule change will help co-borrowersĪccording to Fannie Mae, the minimum credit score to qualify for one of its loans is 620.

Fannie mae foreclosures rules