Fannie Mae Removes Minimum Credit Score! What It Means for Kentucky Homebuyers (Conventional Loan Update 2025)

Breaking Update

Fannie Mae Removes Minimum Credit Score in DU — What It Means for Kentucky Conventional Mortgages

Effective for DU casefiles created on/after November 16, 2025

Fannie Mae has removed the 620 minimum credit score requirement from Desktop Underwriter® (DU®) for new loan casefiles. Instead of a hard cutoff, DU now evaluates your full credit profile. For Kentucky first-time homebuyers, this may unlock access to a Kentucky conventional mortgage even if your score was previously “too low.”

Key Takeaways for Kentucky Homebuyers

No hard 620 floor

DU now runs a comprehensive risk assessment of your overall profile—income, debts, payment history, reserves, property, and purpose—not just your score.

Still full underwriting

“No minimum credit score required” doesn’t mean automatic approval. You must meet standard credit, income, asset, and property guidelines. Lenders may apply overlays.

Timing matters

This applies to new DU casefiles created on or after Nov. 16, 2025. Older files keep old rules. Coordinate submission with your loan officer.

Pricing still risk-based

Rates and mortgage insurance depend on your total profile. We’ll compare conventional vs. VA, USDA, and FHA—and whether KHC down payment assistance helps.

Who Stands to Benefit in Kentucky?

• First-time buyers with scores below 620 but strong income stability and on-time housing payments.
• Borrowers with limited credit depth who can document compensating factors (reserves, lower DTI, verified rent, reduced utilization).
• Clients comparing total cost of ownership across conventional vs. FHA/VA/USDA options.

Pro tip: Before running DU, clean up reporting errors, reduce revolving balances, and assemble documentation (W-2s/1099s, paystubs, bank statements, ID, and housing history). This strengthens DU’s overall assessment even without a score floor.

Conventional vs. FHA, VA, USDA in Kentucky

Conventional (Fannie Mae)

Now no minimum credit score required in DU for new casefiles. Best fit when overall profile is strong and mortgage insurance costs are competitive.

Learn more at Fannie Mae

FHA

Often lower down payment and flexible credit, but includes mortgage insurance. Useful if pricing beats conventional for your profile.

Kentucky FHA Guide

VA & USDA

VA for eligible Veterans/Service Members—often no down payment. USDA offers zero down in eligible areas with income limits.

Kentucky VA Info • Kentucky USDA Guide

Action Plan for Kentucky First-Time Homebuyers

1. Free pre-check: Share your basic info and goals. We’ll map the best path: conventional vs FHA/VA/USDA + KHC.
2. DU scenario runs: We’ll run DU with the new rules and compare pricing and MI.
3. Documentation: Gather ID, income, assets, and housing history so we can move quickly to full approval.

Ready to see if a Kentucky conventional mortgage works for you—without a minimum credit score requirement in DU?

Call/Text 502-905-3708 • Email kentuckyloan@gmail.com • Office: 911 Barret Ave, Louisville, KY 40204

Start Your Pre-Approval

FAQs: No Minimum Credit Score Required in DU

Does this mean scores don’t matter anymore?

No. Scores still influence risk and pricing. DU simply removed the hard 620 gate for new casefiles—your full profile drives the decision.

Will my lender still require a certain score?

Some lenders impose overlays (internal minimums). We’ll shop your scenario with investors aligned to Fannie Mae’s update.

Can KHC down payment assistance pair with conventional?

Yes—if you meet program rules. We regularly compare KHC DPA with conventional, FHA, VA, and USDA options to find the best total cost.

When does this apply?

For loan casefiles created in DU on or after Nov. 16, 2025. If your file predates this, we can recreate the casefile under the new rules where appropriate.

Compliance & Disclosures: For informational purposes only. Not a commitment to lend or extend credit. All loans subject to credit approval, underwriting guidelines, investor overlays, and program/market changes. Equal Housing Lender. Joel Lobb, NMLS #57916. EVO Mortgage, NMLS #1738461. Licensed in Kentucky. Program availability, rates, and terms may change without notice.

Trademarks: Fannie Mae, Desktop Underwriter, and DU are registered trademarks of Fannie Mae. This site is not endorsed by or affiliated with Fannie Mae.

Internal resources: Credit Scores & Mortgage • VA Loans Kentucky • FHA Loans Kentucky • USDA Rural Housing Kentucky • KHC Down Payment Assistance

Kentucky Mortgage Approval Underwriting Myths Debunked for FHA, VA, USDA and Fannie Mae

 Mortgage Approval Underwriting Myths Debunked

Getting approved for a loan is not as hard as some make it. The 3C approach breaks it down in its simplest form so no need to overthink or complicate with “what if’s” or variable situations and these factors are the same in every state. They all have to line up for your loan to be approved but here there are in order of significance

Capacity

- No matter if your credit is in 800’s the ability to afford a loan (capacity aka DTI) is the MOST important C and why most applications either get denied or reduced. Income is EVERYTHING.

To get a conforming (FHA / VA / Conventional) loan you need 2yrs of verifiable Full time income even if it’s pieced together with different employers with 2yrs W2’s and your most recent paystub if you’re an employee and OT and/or bonus cannot be used if you’ve been with your employer for less than 2yrs.

If you have part time employment as well that income cannot be used unless you’ve worked both jobs for at least 2yrs UNLESS your P/T job is the exact same as your F/T job and your hours are not variable then in most cases you can get an exception if you’ve been there for at least 1yr. If you’re self employed 2 most recent tax returns with positive income on line 31 of your schedule C.

If homeownership is your goal, then don’t be cheap and have a certified tax preparer prepare your taxes because it’s likely you’ll need certain docs to get approved only they can provide. Also DO NOT write off all your income to avoid paying the IRS taxes because this will disqualify you from a loan and you’ll have to get a more expensive loan with a bigger down payment.

Credit - 
 

many people think this is the most important but it’s not but it is important. With a high enough capacity (low DTI) I’ve seen clients with minimum scores get approved. FHA requires 580, VA does not have a minimum score requirement and while some lenders can do down in the 500’s generally most lenders do not go below 580, and conventional requires 620.

Having said all that just because you meet the minimum score does not mean you’ll get an approval before credit profile (positive tradeline history, collection activity, credit usage) is what matters most. I’ve seen applicants with 680+ get denied for conventional loans because they have a poor credit profile or low capacity (higher DTI).

FHA is a little more forgiving which is why they are easier loans to get than conventional. Obviously the higher the score, the better the chances are for approval but high scores aren’t needed if capacity and collateral are strong.

Collateral - aka down payment.

 

Underwriters request either 1 bank statement for FHA or 2 bank statements for conventional and all they are looking for is verification of cash to close, large deposit (FHA more than 1% of loan amount deposited in 1 deposit) activity and reserves if needed, not spending habits. Large purchases are irrelevant and NSF’s can be explained with an explanation letter. The higher the down payment in percentages (3.5 or 5%, 10%, 15%, 20% etc…) not dollars ($2000 or $5000 more than required) then the lower the risk and higher chance of approval especially for conventional loans. Plus dollars don’t noticeably reduce your monthly payment but percentages do.

Overlays - 

 

additional restrictions some lenders have in addition to standard mortgage guidelines. If your lender is telling you anything more is required than what’s posted above it’s because they have overlays which make it more difficult to get approved with them.
Example - Veteran’s United will not take credit scores under 620 = OVERLAY

 

 

 

If you want a personalized answer for your unique situation call, text, or email me or visit my website below:

Joel Lobb 

 Email - kentuckyloan@gmail.com 

 Call/Text - 502-905-3708

 www.mylouisvillekentuckymortgage.com
 911 Barret Ave., Louisville, KY 40204

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Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

Kentucky Mortgage Loan Expert For Kentucky FHA, VA, USDA, Fannie Mae and KHC Down payment Assistance Loans

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The reasons you will get turn down for a mortgage loan in Kentucky

Top 10 Reasons Mortgage Loans Are Denied in Kentucky (FHA, VA, USDA & Fannie Mae)

There are several reasons why people in Kentucky might get turned down for a mortgage loan. These reasons can be broadly categorized into issues with the borrower or the property:

Borrower-related reasons:

• Credit score: Low credit scores (generally below 620) are a major factor in loan denials. Having a history of late payments, delinquencies, or collections can negatively impact your score.
• Debt-to-income ratio (DTI): This ratio compares your monthly debt payments to your gross income. A high DTI (generally above 50%) indicates you have a lot of debt compared to your income, making it harder to afford a mortgage payment.
• Employment history: Lenders prefer borrowers with stable employment and income. Recent job changes, gaps in employment, or insufficient income documentation can raise concerns.
• Down payment: A smaller down payment increases the loan amount and loan-to-value ratio (LTV), making the loan riskier for lenders. In Kentucky, FHA loans require a minimum 3.5% down payment, while conventional loans typically require 20%.
• Insufficient assets: While not always a disqualifier, having limited savings or assets can weaken your application by reducing your financial cushion.

Property-related reasons:

• Appraisal value: If the appraised value of the property is lower than the purchase price, it creates a high LTV, making the loan riskier for lenders.
• Property condition: Major repairs or structural issues with the property could require significant investment before closing, which lenders may not be comfortable with.
• Location: Properties in floodplains or other high-risk areas may be ineligible for certain loan types or require additional insurance.

Here are some resources that can help:

• Reasons loan denied in Kentucky https://www.mylouisvillekentuckymortgage.com/2010/10/get-approved-for-mortgage-or-home-loan.html

Joel Lobb  Mortgage Loan Officer

American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708
fax: 502-327-9119
email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/