Fannie Mae is Not a Mortgage Lender

Reader Question: Is Fannie Mae the only mortgage lender available when the middle credit score is 580?

Let me start by saying Fannie Mae is not a mortgage lender. They do not make home loans to consumers, so they have no say over the qualification criteria set by private lenders. So you can completely remove them from your question. The real question is: "Can I get approved for a mortgage loan with a score of 580?"

With that being said, let's talk about what Fannie Mae actually does...

Fannie Mae (formally, the Federal National Mortgage Association) is part of the secondary mortgage market. They purchase the loans made by private lenders, and then "securitize" those loans and sell them off elsewhere through Wall Street. This provides a steady stream of cash into primary lending market, which encourages more lending. In their own words, Fannie Mae's mission is to "provide liquidity and stability to the U.S. housing and mortgage markets."

So you cannot apply for a loan through Fannie Mae, because consumers are not their primary customers. Their customers are the mortgage lenders themselves, from whom they buy loans.

And at the moment, Fannie Mae has its own problems to worry about. They hold trillions of dollars worth of debt, as a result of buying up mortgages in the secondary market, and much of that is bad debt (because of the subprime mortgage crisis). This is one of the reasons the U.S. government had to bail Fannie Mae and Freddie Mac out of financial ruin recently.

On top of this, Fannie cannot impose its will on the private lenders that you would go to for a loan. The individual lenders will set their own standards, and they can do whatever they want in terms of qualification criteria. Right now, they seem to be turning down any type of loan they view as a risk (such as a loan to a borrower with a low credit score). So I'm not sure a credit score of 580 would qualify you for any type of mortgage loan in this economy, regardless of Fannie Mae's influence.

You can always apply for a home loan and see what the lender(s) tell you. We even have a mortgage quotes page where you can get started with that process through LendingTree. But you would not be applying for a "Fannie Mae mortgage loan."

Related articles:

• Fannie and Freddie Are Part of the Problem
• FHA Loans and the Housing Recovery Act
• Buying a House With a Credit Score of 580

I hope that helps you out some. Good luck with whatever you decide to do.