Fannie Mae recently removed its old 620 minimum credit score requirement from Desktop Underwriter, the software most lenders use to approve conventional mortgages. That change, along with big shifts in how medical debt shows up on credit reports, means many Metro Detroit buyers who were told “no” in the past may now qualify. At the same time, builders across Southeast Michigan are offering strong incentives and some local markets are softening, giving buyers more leverage than they have had in years. This guide explains what changed, how it affects real people in Metro Detroit, and the exact steps to take if you want to buy a home in the next 6 to 18 months.
Fannie Mae Credit Score Changes: The Short Version
For years, buyers across Metro Detroit heard the same rule: if your credit score was under 620, Fannie Mae would not touch your file. Lenders ran your application through Desktop Underwriter, a Fannie Mae system, and the computer either approved or denied you with almost no room for nuance.
That hard line is now gone.
Effective mid November 2025, Fannie Mae announced that Desktop Underwriter will no longer apply a minimum third party credit score. Instead, DU uses Fannie Mae’s own internal risk model to decide whether a loan is eligible to be sold to them.
In plain English, that means:
- A 619 score does not automatically kill your file anymore.
- Thin or unconventional credit histories can be evaluated with more context.
- Lenders still have to be comfortable and may keep their own overlays, but Fannie Mae is not forcing a single magic number.
For Metro Detroit buyers who are self employed, who have a recent late payment, or who took a hit during a medical or job emergency, this is one of the most important mortgage changes in years.
What Exactly Did Fannie Mae Change?
Desktop Underwriter And The Old 620 Line
Desktop Underwriter (DU) is the automated engine that most conventional lenders use to decide if a loan meets Fannie Mae standards. For decades, DU came with a baked in rule: if the representative credit score was below 620, the system could not approve the loan for sale to Fannie Mae.
That did not mean no one could ever get financed under 620, but it meant approvals were rare, manual, and often more expensive.
With the November 2025 update:
- DU stopped requiring a minimum third party credit score.
- DU now relies on Fannie Mae’s proprietary risk assessment instead of a single score threshold.
For buyers, the key takeaway is not that credit scores no longer matter. They absolutely still matter. Instead, it is that:
- Compensating strengths like strong income, savings, or lower debt ratios can help offset a weaker score.
- Life events that temporarily dragged your score down are more likely to be weighed in context.
- Lenders have more room to say “yes” on solid files that were previously blocked by one rule.
Who In Metro Detroit Stands To Benefit?
This change especially helps:
- Self employed buyers in places like Rochester, Novi, and Southfield whose tax returns look thin because of legal write offs.
- Contractors in Auburn Hills, tile installers in Warren, hairstylists in Dearborn Heights, and other 1099 earners who have strong cash flow but uneven paperwork.
- Buyers in Ferndale, Hazel Park, Redford, or Taylor who had a late payment, medical collection, or short term hardship that knocked scores into the 500s or low 600s.
It is not a magic wand. But it is a door that was bolted shut for years and is now open, if you walk through it with the right lender and documentation.
Medical Debt, Credit Scores, And Your Buying Power
For a lot of Metro Detroit families, the real credit killer has not been credit cards. It has been hospital bills.
In early 2025, federal regulators finalized a rule intended to remove tens of billions of dollars of medical bills from credit reports and to limit how lenders can use medical debt in credit decisions. At the same time, the major credit bureaus have steadily pulled many medical collections off reports, especially smaller balances and paid accounts.
In early 2025, federal regulators finalized a rule intended to remove tens of billions of dollars of medical bills from credit reports and to limit how lenders can use medical debt in credit decisions. At the same time, the major credit bureaus have steadily pulled many medical collections off reports, especially smaller balances and paid accounts.
On the ground in Oakland, Wayne, Macomb, Washtenaw, and Livingston Counties, it looks like this:
- Many buyers are seeing medical collections disappear entirely from credit reports.
- When that happens, scores can jump by dozens of points without any other changes.
- Some older or disputed medical accounts still show up, especially if the bureaus have not updated or the debt is miscategorized.
If a buyer in Farmington Hills, Sterling Heights, or Ann Arbor has lingering medical collections on their credit report, they should:
- Go to https://www.annualcreditreport.com, and pull all three reports.
- Flag any medical collections that should be gone under current bureau practices.
- Dispute them directly with the bureaus or work with a lender or local professional to do so.
In real life, it is not unusual to see a 30 to 70 point jump when multiple medical collections are removed. That can be the difference between a “maybe later”
and a clear path to preapproval for a Metro Detroit home.
Why First Time Home Buyers Are Getting Older
The data backs up what Metro Detroit agents have been seeing for years.
According to recent national housing research, first time buyers made up only about one fifth of all buyers this year and their median age climbed to around 40. That is the oldest reading in the modern data.
For Metro Detroit, that means:
- More people are renting through their late twenties and thirties in places like Royal Oak, Midtown, and Canton.
- Many are delaying buying in school focused suburbs such as Northville, Brighton, and Troy until kids are older, or not buying at all.
- Down payment savings have to fight against student loans, rising rents, and higher everyday costs.
The big three reasons younger buyers are stuck feel very familiar here:
- Car payments are huge. The average new vehicle in the United States is now around the $50,000 mark, and that payment eats a lot of debt-to-income ratio.
- Credit card interest is punishing. Average purchase APRs for general purpose cards are now in the mid 20 percent range, with many store cards over 30 percent. Minimum payments barely dent a balance.
- Most people were never taught any of this. Michigan students can graduate knowing how to conjugate verbs in a foreign language but never once see a class on compound interest, debt payoff, or mortgages.
Layer those on top of higher home prices and it is not a surprise that the median first time buyer nationwide is about 40.
The combination of Fannie Mae’s more flexible credit approach and the medical debt changes does not fix everything. But for Metro Detroit renters who feel stuck, it moves the starting line closer.
If you are a millennial or first time buyer trying to decide whether Michigan still makes financial sense, Why Michigan Is Affordable for Millennials: Prices, Rents, Programs breaks down the numbers in more detail.
Is Now Actually A Good Time To Buy In Metro Detroit?
This is the question every serious buyer asks, whether they live in Livonia or Lake Orion.
The honest answer is simple: it is a good time to buy if you are ready, and a bad time if you are not. Ready is not about vibes. It is about the math and the market.
From A 9 Percent Rate To Today’s Market
To understand how this plays out long term, look at what happened when a local buyer bought his first home 24 years ago at a 9 percent interest rate:
- Purchase price: roughly $130,500.
- Payment at the time: around $910 per month.
- Today, that same home is worth in the ballpark of $270,000.
- It has been rented for years at about $1,500 per month and is now paid off.
If he had waited for a perfect 5 or 6 percent rate, he would have missed roughly $140,000 in equity growth plus years of rental income. The exact numbers change, but the principle holds.
Today, 30 year fixed rates are sitting in the low 6 percent range after spending much of the past year closer to or above 7 percent. That is not 3 percent, and it probably never will be again. But it is a far cry from double digit rates, and it comes with a crucial advantage that rent does not have:
- Your principal and interest payment is fixed for 30 years.
- Only taxes and insurance can move much, and Michigan has caps and inflation based limits.
Rent in Metro Detroit, from downtown high rises to Novi townhomes to older houses in Madison Heights, almost never stays fixed.
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Real Payment Examples: Hazel Park And Beyond
It is popular to say there are no affordable homes left, especially on social media. The actual listings tell a different story.
Take Hazel Park, a blue collar inner ring suburb that has been quietly reinventing itself. As of fall 2025, the median sale price was about $170,000, down more than 12 percent year over year, and average days on market climbed from about three weeks to roughly four.
That is exactly what opportunity looks like:
- Prices pulled back.
- Homes sit on the market longer.
- Sellers are more negotiable on price, concessions, or repairs.
A move in ready three bedroom house in the mid 200s with a standard down payment will often land in the ballpark of $1,700 to $1,900 per month once taxes and insurance are included. That is roughly what many Metro Detroit renters are already paying for smaller, older, or less stable housing.
If a buyer can swap a rent check that rises every year for a fixed mortgage payment that builds equity, the long run math starts to favor buying very quickly.
If you want to see what that looks like in real time, you can always browse current homes for sale, including Hazel Park and other value pockets, here: https://www.thepernateam.com/
New Construction, Builder Incentives, And Lower Rates
The other big opportunity that many Metro Detroit buyers overlook is new construction.
National builder data shows that somewhere around one third to two fifths of builders have been cutting prices in 2025, with average price reductions around 5 percent. Around two thirds of builders are offering sales incentives such as closing cost credits, rate buydowns, or upgrade packages, the highest share in years.
On the mortgage side, buyers of new construction homes are getting a real edge. Recent reports show new construction buyers with average rates roughly a full percentage point lower than buyers of existing homes, thanks to builder affiliated lenders and buydown programs.
In practical terms, around Metro Detroit that can look like:
- A builder covering 3 to 6 percent of your closing costs, worth $10,000 to $20,000 on a typical suburban home.
- A permanent or temporary rate buydown that drops your payment by several hundred dollars a month.
- Appliance packages, upgraded flooring, or lot premiums thrown in to get the deal done.
Communities in places like Lyon Township, Washington Township, Canton, Chesterfield, and west side corridors near South Lyon and Novi are all seeing builder inventory and promo boards. The key for buyers is knowing what to ask for, which builders are actually motivated, and which incentives matter most over time.
The Truth About 50 Year Mortgages
With affordability stretched, talk of 50 year mortgages has started to show up in headlines and social feeds. On paper, a 50 year term lowers the monthly payment by stretching the balance over a longer period.
In reality, almost every serious analysis has shown the tradeoff is ugly:
- Lenders typically charge a higher interest rate on a 50 year term than on a standard 30 year because of the extra risk.
- The payment savings can be modest once that higher rate is factored in.
- Total interest paid over the life of the loan can be hundreds of thousands of dollars higher on a typical suburban Michigan loan amount.
On top of that, a 50 year mortgage pays down principal painfully slowly, which means:
- You build equity at a crawl.
- You are more exposed if the market dips.
- You may feel stuck in the property if life changes.
For Metro Detroit buyers, a smarter play is usually the opposite:
- Negotiate price and concessions aggressively in this softer market.
- Lock a traditional 30 year mortgage that actually builds equity.
Refinance later if and when rates drift lower, which many economists expect to happen gradually into 2026 if inflation stays under control.
Metro Detroit Is Not Miami: Why Local Market Knowledge Matters
National headlines love extremes. They focus on coastal markets where values spiked and then fell hard. Some Western and Southern metros have seen meaningful price drops and stalled sales.
Southeast Michigan is a different story.
Recent data for the Detroit–Warren–Dearborn metro continues to show:
- Home values up modestly year over year, not crashing.
- Inventory gradually improving but still far from oversupply.
- A patchwork of zip codes where prices are rising, flat, or slightly down, often within the same school district.
Within Metro Detroit:
- Luxury homes in Bloomfield Hills, Birmingham, and Northville move differently from starter colonials in Redford, Taylor, or Eastpointe.
- Walkable neighborhoods in Ferndale or Royal Oak attract a different buyer pool than large lot homes in Highland Township or Brandon Township.
- School districts like Troy, Novi, and Northville continue to drive premium pricing even when interest rates are high.
That is why local expertise matters more now than it did when any listing with four walls and a yard would sell in two days. A good local real estate team sees where:
- Days on market are creeping up.
- Builders quietly slash prices or beef up concessions.
- Future developments, road projects, or school bond issues may shift demand.
For Metro Detroit, that kind of hyper local intelligence can be worth tens of thousands of dollars over the life of a purchase.
Step By Step Game Plan For Metro Detroit Buyers
If someone in Metro Detroit is reading housing headlines and wondering, “Could we actually buy a house now?” here is a practical plan that lines up with these recent changes.
Step 1: Pull And Clean Up Your Credit
- Go to https://www.annualcreditreport.com, and pull all three bureaus.
- Look carefully for medical collections or old medical accounts that may no longer belong on your file.
- Dispute any errors or outdated medical collections with the bureaus directly.
Step 2: Talk To A Lender Who Understands The New Rules
Not every lender has updated guidelines or is comfortable with more complex files. It often makes sense to:
- Work with a lender who is actively using Fannie Mae’s updated DU rules.
- If you are self employed, ask specifically what documentation they need and how they analyze business income.
- If you have a lower credit score, ask how they weigh compensating factors like reserves and payment history.
A strong Metro Detroit real estate team can usually point you to different lenders for different needs, such as:
- Physician or professional loans.
- New construction loans.
- Conventional loans using the new DU guidelines.
- FHA loans for buyers who need more flexibility on credit or down payment.
Step 3: Decide Where You Want To Start
The right area is not just about price. It is about:
- Commute corridors like I 96, I 275, I 75, and M 59.
- School districts that matter to you now or in the future.
- Lifestyle preferences such as walkable downtowns, lake access, quiet subdivisions, or rural acreage.
Metro Detroit has very different value propositions in places like:
- Hazel Park or Redford for entry level detached homes.
- Clinton Township or Macomb Township for mid priced newer builds.
- Northville, Plymouth, or Rochester for high demand suburban living.
- Corktown, Midtown, and Brush Park for urban energy.
Browsing what is available is a good first step. The Perna Team’s home search lets you filter quickly by budget, school district, and more:
https://www.thepernateam.com/
Step 4: Run Real Numbers On Rent Versus Own
Before committing, it is worth comparing:
- Your current rent payment over the next 3 to 5 years.
- A projected mortgage payment including taxes and insurance over that same period.
- Likely equity buildup in each scenario based on modest appreciation, not wild guesses.
A quick way to get a baseline on where your current home might stand is to request a custom home value estimate here:
https://www.thepernateam.com/home-valuation.php
Even if you are renting now, seeing what similar homes are selling for in your target area can reframe your expectations about what is possible.
guide Your Path to Homeownership: A Guide to First-Time Home Buyer Programs in Michigan
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Step 5: Use The Market, Do Not Fight It
In 2020, buyers in Metro Detroit had almost no leverage. Multiple offers, escalation clauses, and inspection waivers were the norm.
Today looks different:
- Rates are higher than the 3 percent days, but lower than recent peaks.
- Days on market are up in many segments.
- Builder incentives are widespread.
- Some micro markets like Hazel Park have seen prices pull back, while others are flat or inching higher.
That is the environment where careful buyers can:
- Negotiate price and concessions.
- Lock a fixed payment while many would be competitors are still waiting for perfect.
- Refinance later if rates drift lower, instead of trying to time both price and rate at once.
How To Stress Test A Metro Detroit Lender Or Agent
Because the rules and the market have shifted so much, it helps to ask sharper questions. For example:
- “How are you using Fannie Mae’s updated DU rules for buyers with scores under 620?”
- “What is your plan for self employed buyers who write off a lot of income?”
- “How many builders are you actively working with in Metro Detroit right now and what are they offering?”
- “In the last 90 days, where have you actually seen price reductions or seller paid concessions?”
Then check what real clients are saying. The Perna Team’s reviews hub collects thousands of local stories from buyers and sellers across Oakland, Wayne, Macomb, Washtenaw, and Livingston Counties: https://www.thepernateam.com/testimonials.php
If you are weighing several agents or teams, that kind of first person feedback from people in your exact position can be invaluable.
For a quick rundown of the biggest land mines to avoid before you even write an offer, read Avoid These 3 Costly Home Buyer Mistakes Before Purchasing a House
Ready To See What You Qualify For In Metro Detroit?
If you are in Metro Detroit and wondering whether these new rules finally put homeownership within reach, you do not have to guess.
A simple starting conversation can help you:
- Clean up your credit in the smartest order.
- Match with the right lender and loan type for your situation.
- Narrow down neighborhoods that fit both your budget and your lifestyle.
- Build a step by step game plan for the next 6 to 18 months.
You can call The Perna Team at (248) 886-4450 or reach out through the contact forms on their site. From there, you can decide whether to move quickly or spend a few months getting a cleaner, stronger preapproval in place.
Key Takeaways
- Fannie Mae’s Desktop Underwriter no longer has a hard 620 minimum credit score, which gives more buyers in Metro Detroit a real shot at approval if the overall file is strong.
- Federal and bureau level changes to medical debt mean many medical collections have already vanished from reports, and cleaning up any stragglers can produce big score gains.
- First time buyers are older and more stretched than ever, but Metro Detroit still offers more approachable price points than many coastal markets.
- New construction in Southeast Michigan can offer below market mortgage rates and significant incentives, often making it more affordable monthly than a comparable resale.
- Talk of 50 year mortgages is more of a distraction than a solution for most buyers, since small payment savings come at the cost of huge extra interest and slow equity growth.
- Metro Detroit is behaving differently than more volatile markets, with pockets of price softening, rising days on market, and expanding builder incentives that create openings for prepared buyers.
- The best strategy for local buyers is to clean up credit, leverage the new Fannie Mae rules, use builder incentives smartly, and work with a team that knows Metro Detroit’s neighborhoods block by block.
Frequently Asked Questions
What did Fannie Mae change about credit scores in 2025?
Fannie Mae removed its long standing minimum 620 credit score requirement inside Desktop Underwriter, so DU now uses an internal risk model instead of a single score cutoff, which opens more room for approval on solid but imperfect applications.
Can I buy a home in Metro Detroit with a low credit score now?
It is more possible than it was, because the new DU rules and medical debt changes allow lenders to weigh your whole file instead of just one number, especially if you have strong income, savings, and on time payments in the recent past.
Does medical debt still hurt my credit when I apply for a mortgage?
Medical debt has much less power than it used to, because new rules and bureau policies are removing many medical collections from reports and limiting how lenders can use them, though you should still dispute any outdated accounts that remain.
Is Metro Detroit still affordable for first time home buyers?
Compared to coastal markets, Metro Detroit remains relatively affordable, especially in starter neighborhoods and inner ring suburbs, even though incomes, down payments, and monthly payments have all climbed.
Are there really still homes under $250,000 that are worth buying?
Yes, markets like Hazel Park, Redford, parts of Southgate, and sections of Macomb County regularly see solid homes sell in the 150,000 to 250,000 range for buyers who are flexible on location and property style.
How do builder incentives work in Michigan right now?
Many builders across Southeast Michigan are offering closing cost credits, rate buydowns, and upgrade packages to move inventory, and national data shows roughly two thirds of builders are using incentives and about one third are cutting base prices.
Is a 50 year mortgage a good idea for Metro Detroit buyers?
For most buyers, a 50 year mortgage is not a good idea because it usually comes with a higher rate, only small payment savings, and dramatically higher total interest costs, while slowing your equity build to a crawl.
Should I wait for mortgage rates to drop before buying?
Waiting can make sense if you are not financially ready, but if you are, it is risky to chase a perfect rate when you could buy now at a fair payment, negotiate well, and refinance later if rates drift lower.
How can self employed buyers qualify for a mortgage in Metro Detroit?
Self employed buyers typically need two years of tax returns, profit and loss statements, and bank records that support their income, and under the new DU rules a lender experienced with self employed borrowers can use strong cash flow and reserves to offset write offs.
Where can first time home buyers in Michigan get help with down payment and closing costs?
Michigan buyers can look at state programs, local grants, and employer benefits, and The Perna Team also maintains a guide to first time home buyer programs in Michigan on their blog that explains the main options in plain English.
How do I know if a lender is using the new Fannie Mae rules correctly?
You can ask how they underwrite files below 620, what their own minimum score is, and how they weigh compensating factors like reserves and rental history, and if they cannot clearly explain the November 2025 DU update, they may not be up to speed.
What is the first step if I think I might finally qualify now?
The first step is to pull your credit, then set up a no pressure call with a local real estate expert who can connect you with the right lender and help you map out neighborhoods and price points, so you can decide whether to move now or prepare for a stronger approval.
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