Fannie Mae Just Eliminated the 620 FICO Minimum: What It Really Means for Homebuyers and the Mortgage Industry

Fannie Mae Just Eliminated the 620 FICO Minimum: What It Really Means for Homebuyers and the Mortgage Industry

For more than two decades, a single number has stood like a brick wall between millions of Americans and conventional homeownership: 620.

If your FICO score was 619 or lower, Desktop Underwriter—the automated underwriting engine used for roughly 60% of all conforming mortgages—wouldn’t even let you in the door. No exceptions, no appeals, no matter how much cash you had in the bank or how low your debt-to-income ratio was.

That wall comes down this Saturday, November 16, 2025.

In Selling Guide update SEL-2025-09 and Desktop Underwriter Version 12.0, Fannie Mae is officially removing the 620 minimum representative credit score requirement for all new loan casefiles. The change is live for any file created on or after this weekend.

What Actually Changed?

Before November 16:

• Single borrower: minimum representative FICO = 620

• Multiple borrowers: average median FICO = 620

• Below those thresholds → automatic “Refer” or “ineligible” in DU

After November 16:

• No minimum score threshold in DU for eligibility

• DU will rely on its full trended credit data, cash-flow analytics, and 150+ risk factors

• Third-party credit scores are still required for delivery, but they no longer act as a hard gate

In plain English: Desktop Underwriter will finally look at the whole borrower instead of rejecting them at the front door because of three digits.

Who Wins the Most?

1. Thin-credit borrowers Recent immigrants, young professionals, and anyone who avoids credit cards now have a real shot at conventional financing.

2. Self-employed and 1099 workers Gig-economy borrowers often have excellent cash flow but lumpy credit profiles. DU’s new logic can finally see the reserves and bank-statement patterns that manual underwriters have been approving for years.

3. “Near-miss” recovery stories Someone who had a medical collection in 2022, paid it off, but still sits at 615 because of utilization—previously locked out. Now they’re in play if everything else is strong.

4. Rural and underserved markets FHFA data shows persistent 580–619 score bands in many LMI census tracts. This change directly supports the Biden-era (and continued Trump-era) push for equitable access.

The Fine Print Nobody Should Ignore

This is not a free-for-all. Three big guardrails remain:

1. Lender overlays Most banks and IMBs will still demand 620 or higher for at least the next 6–12 months. Overlay removal lags behind guideline changes—always.

2. Mortgage insurance companies Arch MI, Essent, MGIC, Radian, and Enact have their own rules. Current MI guidelines typically start at 620 for standard coverage and 600 for some charter programs. Until the PMI industry updates rate cards (likely Q1–Q2 2026), loans under 620 will still face limited MI options or higher LLPAs.

3. Delivery requirements unchanged Fannie Mae still requires a valid tri-merge credit report and at least one score per borrower. “No score” or “invalid score” loans remain ineligible.

Timeline Recap

• November 16, 2025 – DU 12.0 goes live

• Existing casefiles locked before Nov 16 keep old rules

• New submissions or re-submissions after Nov 16 get the new logic

• Expect lender bulletins and updated overlay sheets through December

What Should Borrowers and Loan Officers Do Right Now?

1. Pull fresh tri-merge reports on every 580–619 borrower in your pipeline

2. Re-run DU on any file that was previously “Refer with Caution” solely due to score

3. Document compensating factors aggressively—12 months reserves, 401(k) balances, low DTI, rental history

4. Shop lenders—early adopters who drop overlays first will win the volume war in 2026

The Bigger Picture

Freddie Mac removed their 620 floor in Loan Product Advisor 18 months ago. Fannie Mae’s move finally creates parity across the GSEs. Combined, they purchase or guarantee roughly $1.2 trillion in new mortgages annually.

FHFA Director Bill Pulte called it “the most significant credit-policy liberalization in a generation—without increasing taxpayer risk.” Early internal testing showed less than 1% increase in projected serious delinquency rates, thanks to DU’s machine-learning enhancements.

Bottom Line

The 620 minimum wasn’t a risk-based decision—it was a 1990s relic that survived through inertia. Starting this weekend, Fannie Mae joins the 21st century.

If you or someone you know has been sitting on the sideline because “I just need to get to 620,” the wait might finally be over.

Dust off those files. The barrier just moved.

Sources: Fannie Mae SEL-2025-09, Desktop Underwriter Version 12.0 Release Notes, FHFA public statements (November 2025).

Everything Changes.

It’s been awhile. Lots of personal things in life and that got me thinking about change.

And mortgage rates just dropped, and this changes everything.

Rates are now hovering around 6.17%, the lowest level we’ve seen in three years.

And the impact this has on payments and buying power is massive.

Here’s what that actually looks like:

At the start of the year, a $720,000 mortgage meant roughly a $4,800/month payment.

Today, that same loan costs about $475 less every month.

Or, if you keep the same budget, your buying power just jumped by nearly $100,000 going from a $900,000 home to about $1 million.

This is what people mean when they say “rates drive the market.”

A small movement in rates can completely shift what buyers can afford and how competitive they can be.

For buyers, this is your window. Lower rates mean more leverage, less competition (for now), and the ability to finally get into a home that might’ve been out of reach earlier this year. Waiting for rates to drop further could mean missing the moment. Once the market catches up, prices and competition will follow.

For current homeowners, this is an opportunity to re-evaluate your financial position. Whether it’s a refinance to free up cash flow, shorten your loan term, or tap equity for other goals... a drop like this opens new doors to build wealth and stability.

And for agents, this is your time to re-engage your pipeline. Every buyer who pressed pause earlier this year now has more buying power. Every listing conversation just got easier. Use this data to educate your clients, because the professionals who lead with facts win the trust and the business.

Rates are the heartbeat of the housing market and right now, the pulse is quickening.

Less than a 1% drop can mean the difference between waiting and winning.

Don’t wait for “perfect timing.” The best opportunities are the ones you recognize before everyone else does.

Not Another 2008... But An Opportunity.

This map highlights more than 3,600 properties now with negative equity, and the pattern isn't random with clusters forming around the state.

Miami-Ft. Lauderdale-Palm Beach (my home): Insurance and taxes are eroding values faster than expected.

Naples-Cape Coral: Investor heavy zones hit by recent price corrections and rising carrying costs.

Sarasota-Bradenton: Short-term rental demand is cooling.

Orlando-Daytona Corridor: Oversupply is meeting slower demand.

Jacksonville-Palm Coast: Delinquencies are climbing alongside higher DTI ratios.

This IS NOT another 2008, but it's a signal. Equity cushions are thinning and homeowners who were safe 6 months ago might be slipping into need-to-sell territory.

If you are an agent or an investor: Watch these hotspots closely. They are likely to generate a wave of distressed listings and good buying opportunities.

Navigating the 2025 Government Shutdown: What It Means for Your Government-Backed Loans

As of today, the United States is in the midst of its latest federal government shutdown, now entering its sixth day since funding lapsed on October 1, 2025. The Senate's repeated failure to pass bipartisan funding measures has left millions of Americans—and the economy—holding their breath. While shutdowns are more political theater than total apocalypse, they do create real disruptions, especially for anyone relying on government-backed loans to buy a home.

A Quick Primer: What Happens During a Government Shutdown?

In simple terms, a shutdown occurs when Congress can't agree on a federal budget, forcing non-essential government operations to pause. Essential services—like air traffic control or Social Security payments—continue, but agencies like the Department of Housing and Urban Development (HUD), Veterans Affairs (VA), and the Small Business Administration (SBA) often see staff furloughs and delayed processing. This isn't the first rodeo (remember 2018-2019?), but with the 2025 impasse showing no quick end in sight, it's worth understanding the hits to loan programs that millions depend on.

Government-backed loans make up a huge chunk of the U.S. lending market: FHA insures about 10-15% of mortgages, VA supports veterans' homeownership, USDA aids rural buyers, and SBA fuels small businesses. Here's how the shutdown could throw a wrench in those gears.

Impact on FHA Loans: Delays in Processing and Endorsements

FHA (Federal Housing Administration) loans, popular for first-time buyers with lower down payments, are backed by HUD. During a shutdown, HUD's reduced workforce means slower loan endorsements—the final step where the government guarantees the loan.

• What's affected? New loan applications might face processing backlogs, potentially delaying closings by weeks. Existing loans aren't at risk of defaulting due to the shutdown, but if you're mid-process, expect hiccups in paperwork reviews.

• Real-world example: In past shutdowns, FHA case numbers (required for origination) took longer to issue, stalling deals.

• Flood insurance tie-in: FHA loans often require flood coverage through FEMA, which could also lag, adding another layer of delay.

If you're an FHA borrower, check with your lender for contingency plans—many can work around minor delays by prepping docs early.

VA Loans: Veterans' Benefits on Hold, But Not Hopeless

For active-duty service members, veterans, and eligible spouses, VA loans offer no-down-payment perks backed by the Department of Veterans Affairs. Shutdowns hit here too, with furloughed VA staff slowing certificate of eligibility (COE) issuance and appraisal processing.

• Key disruptions: Loan guarantees—the VA's stamp of approval—could be postponed, pushing back closing dates. In the 2019 shutdown, some veterans waited months for resolutions.

• Bright side: Lenders like Veterans United have histories of troubleshooting with the VA to keep borrowers on track, often using automated systems for COEs.

• Broader effects: Related benefits, like GI Bill payments, might also pause, indirectly stressing finances for military families.

Pro tip: If you're a vet in the loan pipeline, reach out ASAP—many VA-approved lenders maintain hotlines for shutdown-specific guidance.

FHA

Slower endorsements & flood insurance

2-4 weeks

Prep docs early with lender

VA

COE & appraisal backlogs

Up to 1 month

Use automated lender tools

What Should You Do Next? Actionable Steps for Borrowers

1. Contact us immediately: Most are shutdown-savvy and can outline timelines or workarounds.

2. Monitor official updates: Check HUD, VA, USDA, and SBA websites for contingency plans—though ironic, their shutdown pages often stay live.

3. Build a buffer: Have extra cash for potential rate locks or temporary housing if closings slip.

4. Stay informed on negotiations: Bipartisan deals can resolve shutdowns overnight; follow reliable news for breakthroughs.

The Silver Lining: Shutdowns End, and Loans Endure

Government shutdowns are frustrating footnotes in history, not deal-breakers for homeownership or business dreams. While the 2025 stalemate drags on—with no resolution in sight as of October 7—these disruptions are temporary. Existing loans remain secure, and once funding resumes, agencies play catch-up fast. If you're eyeing a government-backed loan, now's the time to get your ducks in a row—delays beat derailed dreams.

What are your thoughts on this shutdown?

Drop a comment below if you're navigating a loan process right now.

Stay resilient, America.

The 1031 Exchange

Recently dear friends of mine (and wonderful clients), asked a question about a 1031 Exchange.

A 1031 exchange is a tax strategy in the U.S. that lets you sell a property you’ve been holding as an investment (like a rental property) and use the money to buy another investment property without paying taxes on the profit right away. It’s named after Section 1031 of the IRS tax code. The main idea is to "defer" (postpone) paying capital gains taxes, which you’d normally owe when you sell a property for a profit.

Here’s how it works in simple terms:

1. Sell an Investment Property: You sell a property you’ve used for investment purposes, like a rental house or commercial building. It can’t be your personal home.

2. Park the Money with a Middleman: The money from the sale goes to a qualified intermediary (a third party who holds the funds) instead of directly to you. This is important because if you touch the money, the tax break could be lost.

3. Buy a New Investment Property: Within 45 days, you need to identify a new investment property (or properties) to buy. Then, within 180 days of selling the first property, you must complete the purchase. The new property has to be of equal or greater value than the one you sold.

4. Defer the Taxes: By rolling the proceeds into the new property, you avoid paying capital gains taxes on the profit from the sale. The tax is deferred until you sell the new property (unless you do another 1031 exchange).

Key Rules to Know:

- Like-Kind Properties: The properties must be "like-kind," meaning they’re both used for investment or business (e.g., you can swap a rental house for an apartment building, but not for a personal vacation home).

- Timing: You have 45 days to pick new properties and 180 days to close the deal.

- Qualified Intermediary: You need a professional middleman to handle the money and paperwork.

- Equal or Greater Value: The new property must cost the same as or more than the one you sold to fully defer taxes.

So Why Do People Use It?

A 1031 exchange lets investors keep more money to reinvest, helping them grow their real estate portfolio without losing a chunk to taxes each time they sell. For example, if you sell a property for $500,000 that you bought for $300,000, you’d normally owe taxes on the $200,000 profit. With a 1031 exchange, you can use that full $500,000 to buy a bigger or better property instead.

Things to Watch Out For:

- It’s not a tax dodge forever; you’ll eventually pay taxes when you sell without doing another exchange.

- There are strict rules and deadlines, so it’s easy to mess up without proper planning.

- You’ll likely need to hire professionals (like a qualified intermediary or tax advisor), which adds some cost.

In short, a 1031 exchange is a way to trade one investment property for another while delaying taxes, but it comes with specific rules you need to follow carefully. If you’re thinking about doing one, it’s a good idea to talk to a tax or real estate professional to make sure it’s done right.

What The Future Holds.

For the first time in awhile, home prices are on the edge of going negative year-over-year.

What’s happening?

• Price-per-square-foot (one of the market’s best leading indicators) is falling faster than usual this summer.

• Inventory has finally caught up to demand, tipping the balance we haven’t seen since before the pandemic.

• Most headlines are still reporting “record prices.”

That gap between reality and the headlines matters. In the next 2–4 weeks, the story will flip to “price drops”, and when it does, buyer and seller psychology will shift overnight.

For buyers: this is rare leverage. More options. More time to decide. More negotiating power.

Don’t expect a crash, but mild price declines are already here.

Move strategically now, and you may avoid the competition that will return quickly if rates dip closer to 6%.

For sellers: waiting could backfire.

By the time you hear “prices are dropping” on the news, it may already be too late to price ahead of the curve.

Aggressive pricing, creative incentives, and strong marketing will separate homes that move from those that sit.

The “record high prices” narrative is ending. The market rewards those who act early, not those who wait for last quarter’s headlines to catch up.

The Rate Cut is Great (about four years late), But...

The Fed's 25 bps cut yesterday was welcome, and more's likely to come. But fixed-rate, permanent debt still depends on Treasuries and spreads, and lenders are still very selective about what they'll touch (thanks to rising CMBS delinquencies, office stress, and a whole other mess of factors).

Not to say this is bad news (rate reductions will likely flow through to SOFR-based loans pretty quick), but if you're looking to save on your next commercial purchase, construction project, or refi, this isn't the silver bullet.

The silver bullet is getting lenders to compete for your business.  Working with OCF Financial lets you do this quickly and efficiently.

Don't Skip Starbucks.

Let’s talk about history:

In 1970, the average national income was $9,430.

In 2025, the average national income (average, remember), was $31,000.

That is a 3x increase.

In 1970, the nationwide average price of a home was $24,400.

In 2025, the nationwide average price of home was $250,000.

That is a 10x increase.

Do you see the problem?

You can triple your income and you'd still be behind your 1970 purchasing power.

The advice you get from Boomers about overpaying for lattes at Starbucks aren't the problem. You can forgo every small pleasure, eat saltine crackers for the rest of your life, cancel Netflix, and it isn’t going to make a bit of difference. It wont make a dent.

The paradigm has shifted. The game has changed. The old advice just doesn’t apply anymore.

You need a plan. You need a strategy.

We can help.

Older Condos Are Selling in South Florida Faster. From FoxBusiness.

...and we have financing options for all of them.

A tip for anyone buying an older unit. Make sure the 25 year inspection (sometimes 10... sometimes 30 if the property is far away from salt water) have been completed. If they are due they can get quite expensive and condo associations often levy an assessment. Your realtor should take that into consideration when negotiating the purchase price.

https://www.foxbusiness.com/media/older-south-florida-condos-now-selling-faster-than-new-construction-units-amid-affordability-crunch

Happy Labor Day