For decades, 620 was the magic number. The minimum credit score to qualify for a conventional mortgage. In 2025, Fannie Mae removed that floor entirely — and Freddie Mac had already done the same years earlier. This is a meaningful shift for Texas buyers who have been told they do not qualify.
What Actually Changed
Fannie Mae and Freddie Mac are the government-sponsored enterprises that buy conventional mortgages from lenders after closing. When they removed the minimum credit score requirement, they were saying: we will buy conventional loans regardless of the borrower's credit score, as long as the overall loan file meets our underwriting guidelines.
This matters because most conventional lenders originate loans with the intention of selling them to Fannie or Freddie. If the GSEs set a minimum score, lenders enforced it. Now that the GSEs have no minimum, lenders have more flexibility to approve borrowers they previously had to turn away.
What Are Lender Overlays?
Here is the nuance: just because Fannie Mae has no minimum does not mean every lender will approve a 500 credit score conventional loan. Individual lenders can apply their own stricter requirements on top of agency guidelines. These are called overlays.
A large retail bank might set a 680 overlay because they want to minimize risk in their portfolio. A wholesale lender might set a 600 overlay. Another might truly underwrite to the file with no floor at all. This is exactly where working with a broker like Kris creates real value — Kris shops the actual overlay requirements across 20+ lenders to find the one whose guidelines fit your credit profile.
What Else Matters in a Conventional Loan File?
Removing the credit score minimum does not mean credit is irrelevant. The overall file still needs to make sense. Underwriters look at:
- Payment history — on-time payments on existing accounts carry significant weight
- Debt-to-income ratio — typically needs to be under 45-50%
- Down payment — larger down payments offset lower credit scores
- Reserves — cash remaining after closing demonstrates stability
- Loan-to-value — lower LTV reduces lender risk
- Employment stability — 2 years in the same field or position
A borrower with a 580 credit score, 20% down, stable employment, and minimal debt is a very different risk profile than a borrower with a 580 score and 3% down with maxed-out credit cards. The removal of the minimum means the full picture can be evaluated rather than an automatic rejection at the door.
What About PMI?
Private mortgage insurance is still required on conventional loans with less than 20% down, and PMI pricing is directly tied to credit score. A lower credit score means higher PMI premiums. So while you may now be able to qualify, the cost of the loan at a lower score will be higher. Kris runs this comparison so you can see the real monthly payment difference between waiting to improve your score versus buying now.
Is Conventional Still Better Than FHA for Lower Credit Scores?
Not necessarily. FHA has historically been the go-to for borrowers with lower credit because of its 580 minimum with 3.5% down. With the conventional floor removed, it is worth comparing both side by side. FHA has mortgage insurance for the life of the loan in most cases. Conventional PMI can be removed at 20% equity. Depending on your score, down payment, and how long you plan to stay in the home, either could be the better choice. Kris runs this comparison as part of every pre-qualification.