Fannie Mae announced it would now require a credit score of at least 580 for them to acquire a loan on an individual basis. Most of you know the credit score is an indicator of how likely a borrower is to pay back the loan.
Fannie Mae is in the business of buying loans from banks and other lenders. Usually, the loans they buy are in large groups to minimize the risk of default. In other words, it's less risky for them to buy several loans at a time and have one default...rather than buy one and rely on that borrower to pay back. This new credit score limit seems to be in relation to individually purchased loans.
All in all, this could affect some potential borrowers because their mortgage wouldn't be marketable to the largest U.S. home funding company.
Read the full article here.
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