November 7, 2022
On October 24, 2022, the Federal Housing Finance Agency (FHFA) announced its approval for participating lenders to use both the FICO 10T and the VantageScore 4.0 credit score models by Fannie Mae and Freddie Mac. These options would replace the previous use of “traditional” FICO score model Fannie and Freddie lenders use to approve the loans.
Why are we discussing Fannie and Freddie in an article about FHA home loans?
There is a possibility that this move could wind up affecting other lending programs, especially if more borrowers choose Fannie Mae and Freddie Mac loans as the result of the changes.
Other government loan programs may follow suit in the future, and in the case of FHA mortgages, some changes are already underway.
These changes do not happen overnight. There is a scheduled multiyear transition period for the changes to be implemented. When that transition is done, Fannie and Freddie lenders are required to approve or deny home loans with both scores when available.
These changes are scheduled for Fannie Mae and Freddie Mac loans only at the time of this writing.
That said, the FHA and HUD have made some plans of their own; there are already changes to FHA loan programs for those who are first-time home buyers. The new FHA loan rules offer additional credit consideration for “positive rental history”.
This is not an option for all applicants, you must typically be a first-time home buyer to qualify for this added consideration.
It’s a move designed to offer lenders more flexibility to approve home loans. FHA and HUD may well have plans for more reforms if the Fannie/Freddie changes go well.
Consider what the FHFA press release about the new FICO score rules adds about other steps the agency has taken to make credit qualifying more accurate.
While Fannie Mae and Freddie Mac “have already taken steps to expand equitable access to credit, such as enhancements to their underwriting systems, both FICO 10T and VantageScore 4.0 include new payment history information such as rent, utilities, and telecom payments when available.”
It is possible we could see more changes from the FHA along these lines if Fannie and Freddie’s versions work out. If these reforms make it easier for people to qualify for a home loan, they are well worth exploring.
Ask a participating FHA lender what is possible based on your specific financial needs and goals for a new home, you may be surprised at your options.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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