Have you ever checked your credit score, looked at the number and decided buying a home was out of the question? You’re not alone. But here’s something that might surprise you: The number you’re looking at may not be the number your mortgage lender uses. And thanks to some significant changes in how credit scores are calculated, the rules of the game are shifting.
For years, many prospective buyers have assumed they needed excellent credit to qualify for a mortgage. According to research from Fannie Mae, consumers have consistently overestimated the minimum credit score needed to purchase a home. In 2023, the average guess was 652. The traditional benchmark for many conventional loans was actually 620, and even that is no longer a universal requirement.
Now things are getting more interesting.
The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, has been modernizing how mortgage lenders evaluate creditworthiness. For decades, the industry relied primarily on Classic FICO scores. Today, lenders can also use VantageScore 4.0 for eligible conventional mortgages, while another model, FICO 10T, is approved for future implementation.
Why should you care? Because these newer models can consider a broader picture of your financial behavior, including certain rental payment histories. Think about that for a moment. Someone who has faithfully paid rent every month – but has limited traditional credit accounts – may have a better opportunity to demonstrate financial responsibility.
That doesn’t mean everyone suddenly qualifies for a mortgage, or that a lower credit score automatically gets a free pass. Lenders still evaluate income, employment, existing debt, down payment funds and overall financial stability. And, depending on which scoring model a lender uses, your score could look different from the one displayed on your favorite credit monitoring app.
Here’s where I see buyers making a mistake: They disqualify themselves before ever speaking with a lender.
Whether you’re looking at a starter home in Crestline, a cabin in Running Springs or a property in Lake Arrowhead, don’t assume homeownership is out of reach simply because of a number on your phone.
And regardless of which scoring model is used, the fundamentals haven’t changed. Pay your bills on time, keep credit card balances manageable, avoid unnecessary new debt and review your credit reports for errors. Most importantly, talk with a knowledgeable mortgage professional before making assumptions about what you can afford.
The bottom line? Credit scoring is evolving and that could create opportunities for buyers who previously thought they couldn’t qualify. Don’t let an assumption make one of the biggest financial decisions of your life.
You may be closer to owning a home than you think.
Theresa Grant is a real estate broker and columnist covering Lake Arrowhead, Crestline, Running Springs and the surrounding mountain communities. Reach her at (909) 442-1345, visit www.HomesInLakeArrowhead.com and follow her on social media, @TheresaGrantRealtor. Theresa is a Broker Associate with REAL Broker Technologies. DRE#01202881.
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