Worried you won’t qualify for a home loan because your credit score is too low? Well, help is on the way. Beginning September 18, you can qualify for a conventional loan through Fannie Mae with a credit score below the standard 620 minimum. Up next, we’ll explain how this works. We’ll also look at how it could make all the difference in you achieving your dreams of homeownership.

Having a Co-Borrower with Good Credit is the Key

Prior to this change in Fannie Mae’s loan eligibility rules, no one with a credit score below 620 would be eligible for a conventional home loan. In fact, even if you had a co-borrower and that co-borrower boasted a score of 620 or higher, neither loan applicant would qualify. This is because Fannie Mae evaluated the two applicants’ credit based on the lower credit score.

However, beginning this weekend, Fannie Mae will assess co-borrowers on the basis of their average credit score. So take, for example, one co-borrower with score of 600 and the other co-borrower with a score of 700. Their average credit score of 650 would the number upon which they are now evaluated by a mortgage lender. As a result, they would be eligible for a conventional loan. This does not mean, however, that they would necessarily be approved for the loan. In reality, it doesn’t affect their chances of approval at all. But this change does gives them a fighting chance. It also gives them an opportunity they didn’t have under the previous Fannie Mae guidelines.

The Broader Application

Previously, if one co-borrower had a disqualifying credit score, the workaround was to remove that co-borrower from the loan application. There is just one problem with this, however. Removing a low-credit co-borrower from the loan also means removing their income. And what if the low-credit co-borrower makes more money than the co-borrower with higher credit? Obviously, your chances of being approved are better when the income of both co-borrowers is considered. This is especially true right now, when houses are selling for higher prices than they historically have sold. But thanks to the change we’ve been discussing, both a lower- and higher-credit score applicant can now remain on the loan. And this means their combined income will as well.

Last Word

If you’re a co-borrower with a credit score below the standard 620 minimum, don’t fret. As long as your co-borrower has a credit score high enough to offset yours, you have a chance to be approved for a conventional home loan. Of course, if you have any questions on how this all works, please contact us. As always, we’re ready and eager to serve you with excellence.


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