As of November 16, 2025, Fannie Mae no longer applies the old 620 minimum credit score for loans evaluated through its Desktop Underwriter (DU) system.
But the truth is, even if you qualify with a lower score, many lenders still don’t offer pricing below 620. And for those who do, rates and fees are often higher. If your credit score falls below 700, FHA is usually the more affordable option.
Below, I’ll explain everything you should know about the credit score update and share real-world examples to help you decide between FHA and conventional.
Conventional mortgages follow the guidelines set by Fannie Mae and Freddie Mac. These are government-sponsored enterprises (GSEs) under Federal Housing Finance Agency (FHFA) oversight that buy and guarantee most conventional loans.
They set rules to determine minimum credit scores, down payment requirements, loan limits, and overall loan costs. Both Fannie Mae and Freddie Mac require robust credit profiles for loan approval.
Previously, DU (Fannie Mae’s automated system) enforced a 620 minimum score, which meant applications were automatically denied if borrowers didn’t meet that credit score threshold.
After the latest update, DU now reviews the borrower’s full credit and financial profile to determine eligibility without applying a hard 620 score cutoff.
Fannie Mae aims to widen borrower access, particularly for first-time and middle-income homebuyers who have imperfect credit but handle their finances responsibly.
For example, many people with scores under 620 manage their money well but experience difficulties like student loans, medical debt, or limited credit history.
Well, no. Fannie Mae’s credit policy update doesn’t mean that anyone with a score below 620 will instantly qualify.
What it does mean is that DU can now look at the full picture and evaluate a borrower’s actual financial patterns instead of heavily relying on a single number to issue an Approve/Eligible.
In reality though, lender overlays and pricing make approvals for lower scores rare. Many lenders still won’t accept below 620, and the few that allow lower scores often charge much higher rates and mortgage insurance.
If your score is on the lower side, you’ll need strong compensating factors, such as:
Low-score conventional approvals remain the exception, not the norm. Here’s why:
Investors need time to reassess risk, update models, and revise their rate sheets and overlays. Until that happens, many lenders simply won’t have workable pricing for credit scores under 620.
This means a DU approval shows you’re eligible, but it doesn’t guarantee the lender will actually offer the loan.
Every 20-point tier below 700 significantly increases your interest rate and mortgage insurance (MI) unless you’re putting at least 20% down.
Here’s a quick overview:
If your credit score is below 700, an FHA loan is the cheaper option for you.
Reef Merhi, branch manager at Texas United Mortgage, explains that these are the actual situations where our lenders would consider a conventional loan for someone with a lower credit score:
For 2025, FHA loan limits start at $524,225 for single-family homes and go up to $571,550 in certain higher-cost counties.
If you need a loan above your county’s FHA limit, a conventional loan may fit better.
Example:
Why conventional works: Since your loan amount is much higher than the FHA limits, conventional financing is a better match for your financial needs.
At Texas United Mortgage, we’re already using the new 2026 conventional conforming loan limit of $832,750 for one-unit properties in Texas.
Since Texas is a community property state, FHA requires lenders to factor in your spouse’s liabilities even if they’re not listed as a borrower.
Example:
Why conventional works: Conventional lets us exclude your spouse’s debts entirely.
With a conventional loan, you don’t have to pay PMI when your down payment is 20% or more.
Example:
Why conventional works: In this situation, conventional becomes the better fit because your large down payment lets you avoid the extra costs that come with an FHA loan.
Avoid conventional loans if your credit score is below 700 and your situation looks like this:
→ Around 660 credit
→ 3% to 5% down paymentHere’s why:
Key Takeaway: If you have a low score, small down payment, and standard DTI, FHA is undoubtedly the better option.
While Fannie Mae has removed the hard 620 credit score barrier, it doesn’t mean that getting a conventional loan gets any easier.
If your score falls below 700, FHA will give you a more favorable rate, better mortgage insurance, and a cheaper total payment.
Let our experienced loan officers at Texas United Mortgage show you the actual payment differences by comparing both FHA and conventional loans side by side. This way, you’ll confidently know which loan type truly fits your financial situation.
Contact us today to start your application!