Fannie Mae Guidelines: What You Need to Know

Fannie Mae mortgages are the most common type of mortgage for buying or refinancing a home. Understanding Fannie Mae guidelines improves your odds of getting a conventional mortgage approval — here’s what to know.

Key takeaways

• You’ll generally need a 620 credit score or higher to qualify for a Fannie Mae mortgage.
• Fannie Mae loans are available for both single-family and multifamily homes.
• It will be harder to get approved for a loan if you’ve had a previous bankruptcy or foreclosure.

What is Fannie Mae?

Fannie Mae is a nickname for the Federal National Mortgage Association (FNMA). Fannie Mae is one of two government-sponsored enterprises (GSE) that provide lenders with cash to fund home loans at affordable mortgage rates. In turn, lenders use the cash raised by selling mortgages to Fannie Mae to fund new loans, with that cash adding stability to the U.S. mortgage market. Lenders must follow Fannie Mae rules when underwriting conventional loans, which aren’t backed by the federal government.

Before Fannie Mae’s creation, home loans had to be repaid quickly (sometimes in as few as five years), with large balloon payments due at the end of the term. Nearly a quarter of U.S. homeowners lost their homes to foreclosure during the Great Depression, and banks weren’t willing to fund new mortgage loans. The government created Fannie Mae to provide the financial security for lenders to offer a new type of mortgage — the long-term, fixed-rate loan — aimed at making homeownership more affordable.

Fannie Mae guidelines: At a glance

The FNMA selling guide details the rules lenders use when determining your eligibility for a Fannie Mae mortgage. The rules may change in response to major economic events. For example, during the COVID-19 pandemic, lenders adjusted employment verification rules, since many people were laid off or their companies were closed temporarily.

The guidelines for buying a home are different from home refinance rules. Conventional loans aren’t guaranteed by any government agency but lenders follow rules set by Fannie Mae and Freddie Mac. Below, we cover the minimum mortgage requirements for conventional purchase and refinance loans:

Fannie Mae guidelines for purchase loans

→ Down payment. You’ll need at least a 3% down payment for Fannie Mae’s HomeReady® and standard loan programs for a single-family home, as long as it’s a primary residence. The programs allow gift funds from family members if you don’t have enough money saved up.

→ Credit score. The minimum credit score for a conventional mortgage is 620, but you may need a higher down payment and less debt to qualify. You’ll qualify for better mortgage rates and lower private mortgage insurance (PMI) premiums with a higher credit score.

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→ Credit history. You’ll need to wait up to seven years after a foreclosure to take out a conventional loan. A Chapter 7 bankruptcy will require a four-year waiting period before you can qualify. You may want to consider an FHA loan if you want to buy a home sooner: The waiting period is only two years after a Chapter 7 bankruptcy and three years after a foreclosure.

→ Debt-to-income (DTI) ratio. Your DTI ratio is calculated by dividing your total monthly recurring debt (including your new mortgage payment) by your gross monthly income and multiplying the result by 100 to get a percentage. Although 45% is the standard maximum, lenders may accept a DTI ratio up to 50% if you have higher credit scores and ample cash reserves.

→ Cash reserves. Also called mortgage reserves, conventional lenders may require proof that you have up to six months of mortgage payments set aside to cover your mortgage if you encounter tough financial times. You may be required to prove you have the money for reserves if:

• Your credit scores are low and you’re making a small down payment
• You’re buying a second home or investment property
• You’re buying a multifamily home
• You currently own other real estate financed with mortgages

→ Income. Two years of employment is the standard requirement, but borrowers with an employment history of less than two years may be able to get a mortgage with a new job under certain conditions. Self-employed borrowers may need to provide additional financial documents to verify their income.

→ Income limits. The HomeReady loan is the only Fannie Mae loan program with income limits — check the limits in your area to see if you’re eligible.

→ Loan limits. The Federal Housing Finance Agency (FHFA) sets conforming loan limits each year based on changes in average home prices. As of 2025, the maximum conforming Fannie Mae loan limit is $806,500 for a single-family home in most parts of the country. Mortgages with higher limits, called “high-balance loans,” are available in higher-cost areas of the country.

→ Home appraisal. You’ll generally pay between $300 to $500 for a home appraisal on a purchase. In some cases, Fannie Mae may allow for a property inspection waiver (PIW). The PIW option is unique to Fannie Mae loans — government-backed purchase loans (FHA loans, VA loans and USDA loans) require home appraisals regardless of how much money you put down.

→ Title. Fannie Mae guidelines require a search of your property’s title history to ensure it’s free of any ownership claims from previous owners or any judgments or liens, such as unpaid property taxes. Title insurance is required to cover the sales price on a purchase or the loan amount on any Fannie Mae refinance loan.

→ Property types. Conventional loan requirements allow you to finance a home with up to four units in a regular subdivision, a co-op, condominium building or a planned unit development (PUD). Fannie Mae also offers a manufactured home loan program for manufactured homes attached to a permanent foundation.

→ Occupancy types. You can use a Fannie Mae loan to buy a primary or secondary residence, or an investment property, while government-backed loans only allow you to buy a primary residence. One caveat: The down payment requirements are higher for second homes (10% minimum) and investment properties (15% minimum).

→ Mortgage insurance. A big advantage of conventional mortgages is they don’t require mortgage insurance with a 20% down payment, while loans backed by the Federal Housing Administration (FHA) require it regardless of your down payment amount. Conventional mortgage insurance (known as PMI) usually costs between $30 and $70 for every $100,000 you borrow. It’s typically added to your monthly payment, but can be paid in a lump sum or financed into your interest rate.

Use a mortgage calculator to find out what your monthly payments would be.

Fannie Mae guidelines for refinance loans

Whether you’re refinancing to lower your payment, pay off your balance faster or tap equity for home improvements, you’ll need to know the Fannie Mae rules to make sure you qualify.

→ Refinance purpose. Fannie Mae sets different rules depending on the “purpose of your refinance.” In general, the rules are more stringent if you’re borrowing more than you currently owe to pocket some cash — commonly known as a cash-out refinance. A rate-and-term refinance is a refinance that replaces your current loan with a new mortgage at a better rate, shorter term (such as switching from a 30-year to a 15-year mortgage) or a “safer” loan, such as refinancing an adjustable-rate mortgage (ARM) to a fixed-rate loan.

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→ LTV ratio. Your loan-to-value (LTV) ratio is a measure of how much of your home’s value is being borrowed. When you’re refinancing, the higher your LTV ratio, the more risk there is that the lender will lose money if you default and they have to foreclose.

Fannie Mae sets the maximum LTV ratios at:

• 97% if you’re applying for a limited cash-out refinance
• 80% if you’re applying for a cash-out refinance on a primary residence
• 75% for a cash-out refinance on a two- to four unit home, second home or a one-unit investment property
• 70% for a cash-out refinance on a two- to four-unit investment property

→ Credit scores and credit history. The minimum credit score is 620 for a rate-and-term refinance and 640 for a cash-out refinance. Bankruptcy and foreclosure waiting periods are the same as for purchases.

→ DTI ratio. The maximum DTI ratio is 50%, but you may need a higher credit score to qualify for a cash-out refinance with an LTV ratio above 75% if you don’t meet automated underwriting guidelines.

→ Cash reserves. The same rules that apply to purchase loan reserves apply to most refinance loans. There are two scenarios that usually require more cash for reserves:

• Cash-out refinances on two- to four-unit homes with credit scores 680 to 699 may require 12 months of payment reserves
• Cash-out refinances with DTI ratios of 45% or higher require proof of six months of payment reserves

→ Home value. If you refinance to reduce your rate or term, you’re more likely to get an appraisal waiver than if you’re tapping equity with a cash-out refinance. If you do need an appraisal, make sure your home looks like the homes for sale in your neighborhood, as the appraiser will compare your home to recent sales and current listings.

→ Title. Your refinance lender will check for new liens on your home and require a new title insurance policy. You may have to jump through extra hoops if you’ve taken out a HELOC (home equity line of credit) or a home equity loan on the house.

→ Property types. Fannie Mae sets lower LTV ratio limits on refinancing the following property types:

• Second homes
• Investment properties
• Two- to four-unit homes
• Manufactured homes

→ Occupancy types. Second homes and investment properties come with some extra guidelines. In general:

• You’ll be restricted to a lower LTV ratio
• You’ll need more cash reserves to qualify
• You’ll need higher credit scores to qualify

→ Mortgage insurance. You’ll need mortgage insurance if your refinance LTV ratio is more than 80%.

Pros and cons of a Fannie Mae mortgage

How to apply for a Fannie Mae loan

To get a Fannie Mae mortgage, you must fill out the Uniform Residential Loan Application. You’ll need to provide the following information:

• Borrower information. This is where you provide various details, including your name, date of birth, address and Social Security Number. If you’re applying with a co-borrower, you’ll also need that person’s information.
• Financial information. You’ll need to provide information about your finances (and your co-borrower’s finances, if you have one). This includes your assets, such as bank accounts and real estate, along with debts and expenses.
• Property information. Naturally, you’ll also need to provide details about the property you want to buy, including the address, value and whether you’re buying it for use as a primary residence, second home or investment property.