How Loan Product Advisor Simplifies Credit Assessment
When Fannie Mae's automated underwriting system gives you an "Accept" recommendation, the credit review process becomes much simpler than traditional manual underwriting. LPA has already analyzed your credit profile and determined it meets Fannie Mae's standards.
Your lender still pulls your credit report and documents your credit history, but they don't need to collect written explanations for every late payment or collection account. The system has factored these items into its decision already.
Say you had a 60-day late payment on a credit card two years ago. In manual underwriting, you'd need to write a letter explaining what happened and provide supporting documentation. With an LPA Accept, that explanation isn't required because the automated system has already weighed that derogatory item against your overall credit profile.
Required Documentation for Accept Mortgages
Your lender must collect these specific documents to satisfy Fannie Mae's credit requirements:
- Uniform Residential Loan Application (Form 1003)
- Credit reports from all three bureaus
- Last Feedback Certificate from Loan Product Advisor
- Underwriting summary (typically Form 1077)
The lender typically won't need to verify mortgage payments, rent payments, or other debts that don't appear on your credit report. This streamlined approach saves time and reduces paperwork compared to manual underwriting.
Qualifying Without a Credit Score
You can still get a Fannie Mae loan even if you don't have a traditional credit score, but the requirements become more complex. The rules depend on whether some borrowers have scores or none do.
When Some Borrowers Have Credit Scores
If you're buying with a co-borrower who has a credit score, you can qualify without one yourself. The property must be a single-family home that you'll live in as your primary residence. The loan must be a purchase or no-cash-out refinance.
When the borrower without a credit score contributes 50% or more of the household income, additional requirements kick in. You'll need at least two payment references from the past 12 months. These can be utility bills, insurance payments, or other recurring obligations.
One of your payment references must be housing-related - either rent or a previous mortgage. This housing payment history cannot have any 30-day late payments in the past year. Your other payment references can have one 30-day late payment but no 60-day or longer delinquencies.
When No Borrowers Have Credit Scores
The requirements become stricter when neither borrower has a credit score. The loan-to-value ratio cannot exceed 95%, and you must choose a fixed-rate mortgage. Super conforming loans and Refi Possible mortgages aren't allowed.
Each borrower needs two payment references with the same payment history standards described above. Additionally, at least one borrower must complete a homeownership education program before closing.
Payment Reference Documentation Requirements
Your lender must verify each payment reference through written documentation that meets Fannie Mae's age requirements [[5102.3]] and [[5102.4]]. The verification must show the payment history for the full 12-month period.
Acceptable documentation includes account statements, payment receipts, or verification letters from the creditor. The documentation cannot be older than the limits specified in Fannie Mae's age of documentation guidelines [[5102.4]].
Collections, judgments, and tax liens filed within the past 24 months will disqualify borrowers without credit scores. Medical collections are the only exception to this rule.
Recent Credit Inquiries and New Debt
Your credit report shows every time someone checks your credit. When lenders see inquiries from the past 90 days, they must investigate whether you took on new debt.
If you applied for a car loan last month and got approved, your lender must verify the loan details and include the monthly payment in your debt-to-income calculation. This applies even if the new debt doesn't appear on your credit report yet.
The verification requirement exists because credit reports often lag behind actual loan approvals. A new $400 car payment could push your debt-to-income ratio over Fannie Mae's limits, so lenders need current information.
Rent Payment History Benefits
First-time homebuyers can receive credit for positive rent payment history through LPA's assessment. This feature can improve your overall credit evaluation and potentially lead to better loan terms.
To qualify, you must have been renting for at least 12 months with monthly rent of $300 or more. The rent payments must come from your bank account, creating a verifiable electronic trail.
Your lender can document your rent payments through bank account verification reports or by providing borrower-supplied documentation like lease agreements and canceled checks. The verification must show timely payments with no 30-day late payments in the past year.
Cash Flow Analysis
LPA can analyze your bank account patterns to identify positive cash flow trends. When the system detects consistent savings or income patterns, it may improve your credit assessment.
Your lender obtains verification reports covering at least 12 months of checking, savings, investment, and retirement account activity. The system analyzes deposits, withdrawals, and account balances to determine your financial stability.
This analysis happens automatically when your lender submits complete account verification data to LPA. You don't need to request this feature, but having well-documented account activity can work in your favor.
Common Complications and Gotchas
The biggest challenge for borrowers without credit scores involves gathering adequate payment references. Utility companies and insurance providers don't always maintain detailed payment histories, making verification difficult.
Housing payment history creates particular complications for borrowers who've lived with family or in informal arrangements. Canceled rent checks to a landlord work, but payments to family members often don't meet verification standards.
Recent credit inquiries can surprise borrowers who forgot about applications they submitted. That store credit card you applied for while furniture shopping counts as new debt if approved, even if you haven't used it.
The 90-day inquiry rule catches many borrowers off guard during the mortgage process. Shopping for a car or applying for other credit while your mortgage is processing can create last-minute documentation requirements and potential qualification issues.
References
For the official guidelines, see 5201.1: Credit assessment with Loan Product Advisor® in the Fannie Mae Selling Guide.
Mortgage guidelines change. Stay current.
Fannie Mae and Freddie Mac update their rules several times a year. Get notified when changes affect your mortgage eligibility, required documents, or loan terms.
No spam · Unsubscribe anytime
Original Freddie Mac Guideline Text
This section contains requirements related to:
Documenting Borrower’s credit reputation
Assessing Borrower’s credit reputation
Accept Mortgages with Borrowers who do not have a usable Credit Score
Inquiries on a Borrower credit report
Rent payment history included in the Loan Product Advisor
®
assessment
Borrower cash flow included in the Loan Product Advisor assessment
(a)
Documenting Borrower’s credit reputation
To document the credit reputation for Loan Product Advisor Accept Mortgages, the Seller must use the following:
The Uniform Residential Loan Application
Section 5203.1
for details)
The Last Feedback Certificate
An underwriting summary (e.g.
Form 1077, Uniform Underwriting and Transmittal Summary
)
Direct verification of Mortgage debt, rental payments and other debts not shown on the credit reports are typically not required for Accept Mortgages. For Accept Mortgages with Borrowers who do not have a usable Credit Score, the requirements in
Section 5201.1(c)
below apply.
The Seller is not required to obtain or document an explanation of adverse or derogatory credit information on Accept Mortgages.
(b)
Assessing Borrower’s credit reputation
For Accept Mortgages, Loan Product Advisor has assessed the Borrower’s credit reputation and determined that the credit reputation is acceptable.
(c)
Accept Mortgages with Borrowers who do not have a usable Credit Score
(i)
Mortgages where not all Borrowers have a usable Credit Score
For Mortgages where not all Borrowers have a usable Credit Score, Loan Product Advisor will apply the following requirements:
At least one Borrower must have a usable Credit Score, as determined by Loan Product Advisor
The transaction must be a purchase or “no cash-out” refinance Mortgage
The Mortgaged Premises must be a 1-unit property, occupied by all Borrowers as their Primary Residence
®
Mortgages, if the Borrower(s) without a usable Credit Score contributes 50% or more of the total monthly income, the Seller must determine that the following additional requirements are met:
Each Borrower without a usable Credit Score must have at least two payment references in the United States comprised of Noncredit Payment References and/or Tradelines not appearing on the credit report that meet the requirements in the following Guide sections:
5102.3
5102.4
Documentation of Tradelines and Noncredit Payment References
5202.1(b)
If two or more Borrowers without a usable Credit Score have the same payment reference, then the payment reference may count for each of those Borrowers.
Each payment reference must have existed for at least the most recent 12 months
At least one Borrower without a usable Credit Score must have a
housing payment history
as one of the payment references and all housing payment histories must have no 30-day or greater Delinquencies in the most recent 12 months
In the event more than one Borrower without a usable Credit Score has a housing payment history, then all such housing payment histories for the most recent 12 months (or length of housing payment history if less than 12 months) must be verified
For all payment references
other than housing
, in the most recent 12 months, there must be:
No more than one 30-day Delinquency; and
No 60-day or greater Delinquencies
Each Borrower without a usable Credit Score must have no collections (other than medical), judgments or tax liens filed in the most recent 24 months
(ii)
Mortgages where no Borrower has a Credit Score
For Mortgages where no Borrower has a Credit Score, Loan Product Advisor will apply the following requirements:
The transaction must be a purchase or “no cash-out” refinance Mortgage
The Mortgaged Premises must be a 1-unit property, occupied by all Borrowers as their Primary Residence
The loan-to-value (LTV)/total LTV (TLTV)/Home Equity Line of Credit (HELOC) TLTV (HTLTV) ratios must not exceed 95%
The Mortgage must be a fixed-rate Mortgage
The Mortgage must not be a super conforming Mortgage
The Mortgage must not be a Refi Possible Mortgage
In addition, unless the Last Feedback Certificate includes a feedback message that indicates positive Borrower cash flow was identified, the Seller must determine that the following requirements are met:
Each Borrower must have at least two payment references in the United States comprised of Noncredit Payment References and/or Tradelines not appearing on the credit report that meet the requirements in the following Guide sections:
Section 5102.4
Documentation of Tradelines and Noncredit Payment References
Section 5202.1(b)
If two or more Borrowers have the same payment reference, then the payment reference may count for each of those Borrowers.
Each payment reference must have existed for at least the most recent 12 months
At least one Borrower must have a
housing payment history
as one of the payment references and all housing payment histories must have no 30-day or greater Delinquencies in the most recent 12 months
In the event more than one Borrower has a housing payment history, then all such housing payment histories for the most recent 12 months (or length of housing payment history if less than 12 months) must be verified
For all payment references
other than housing
, in the most recent 12 months, there must be:
No more than one 30-day Delinquency; and
No 60-day or greater Delinquencies
Each Borrower must have no collections (other than medical), judgments or tax liens filed in the most recent 24 months
When the credit reputation for all Borrowers is established using only Noncredit Payment References, at least one Borrower must participate in a homeownership education program before the Note Date, or the Effective Date of Permanent Financing for Construction to Permanent Mortgages and Renovation Mortgages. (See
Section 5103.4
for requirements related to homeownership education.)
(d)
Inquiries on a Borrower credit report
When the credit report indicates that a creditor has made an inquiry within the previous 90-day period, the Seller must determine if additional credit was granted. If additional credit was granted, the Seller must:
Obtain verification of the debt; and
Include it when qualifying the Borrower (subject to the requirements in
Section 5401.2
for the monthly debt payment-to-income ratio)
(e)
Rent payment history included in the Loan Product Advisor assessment
(i)
Overview
For certain Mortgages, Loan Product Advisor’s assessment of a Borrower’s rent payment history submitted to Loan Product Advisor may positively impact the credit assessment. For any such Mortgage, the Feedback Certificate will return a feedback message indicating the Borrower’s rent payment history was included in the assessment.
(ii)
Eligibility requirements
For Loan Product Advisor to consider a Borrower’s rent payment history in the credit assessment, the following requirements must be met:
The Mortgage must be a purchase transaction Mortgage
At least one Borrower with a rent payment history must:
Have a usable Credit Score, as determined by Loan Product Advisor,
Be a First-Time Homebuyer who intends to occupy the subject property as their Primary Residence, and
Have been renting for a minimum of 12 months with a monthly rent payment of at least $300 paid from the depository account(s) on the verification report or documented as described in
Section 5201.1(e)(iii)(B)
below
The Seller must submit to Loan Product Advisor the current monthly rent amount paid by the Borrower and:
Obtain a verification report of the depository account(s) from which the rent payments are made, or
Provide true for the Positive Rental History Indicator
(iii)
(A)
Verification reports
For each verification report obtained, the Seller must:
Confirm that each depository account is owned by the Borrower and that the account(s) is the one from which the Borrower pays rent
Ensure that the most current version of the verification report is used by Loan Product Advisor. If the Seller obtains an updated report, the Mortgage must be resubmitted to Loan Product Advisor to ensure assessment of the most current information.
Maintain the verification report in the Mortgage file for transactions where the Last Feedback Certificate includes a feedback message that the rent payment history was successfully identified in Loan Product Advisor, resulting in a Risk Class of Accept
The expiration date of the verification report reflected in feedback messaging complies with the age of documentation requirement in
Section 5102.4
.
(B)
Borrower provided documentation
The Seller must obtain Freddie Mac’s written approval before selling Mortgages using Borrower provided documentation to support the Borrower’s rent payment history to Freddie Mac by contacting its Freddie Mac representative or Customer Service at
800-FREDDIE
.
When the Seller indicates positive rental history in the Loan Product Advisor submission and the Last Feedback Certificate indicates positive rent payment history was included in the credit assessment using Borrower provided documentation, the Seller must maintain the following documentation in the Mortgage file supporting the monthly rent amount submitted to Loan Product Advisor:
Executed lease(s) for the most recent 12 months
Proof of timely rent payments (i.e., no 30-day or greater late payments) for the full lease amount paid by the Borrower in accordance with the terms of the lease for the most recent 12 months as of the Application Received Date. Such payments must be documented by one or more of the following:
Canceled checks
Asset account statements as described in
Section 5501.1(e)
Third-party asset verifications as described in
Section 5201.1(e)(iii)(A)
above
Evidence of rent payments transferred from the Borrower's bank account through a third-party money transfer application
Note: Verification of rent and/or evidence of cash payments (e.g., money orders) are not acceptable documentation.
The documentation used to support the Borrower’s rent payment history must comply with the age of documentation requirement in
Section 5102.4
.
(f)
Borrower cash flow included in the Loan Product Advisor assessment
(i)
Overview
For certain Mortgages, Loan Product Advisor’s assessment of a Borrower’s monthly cash flow identified on a verification report and submitted to Loan Product Advisor may positively impact the credit assessment. For any such Mortgage, the Feedback Certificate will return a feedback message indicating the Borrower’s positive cash flow was included in the assessment.
(ii)
Eligibility requirements
For Loan Product Advisor to consider Borrower cash flow in the credit assessment, the Seller must obtain a verification report of the Borrower’s checking, savings, investment and retirement account(s) with at least 12 months of data and submit to Loan Product Advisor.
(iii)
Documentation requirements
For each verification report obtained, the Seller must:
Confirm that each asset in the verification report is owned by at least one Borrower and such Borrower has access to the funds
Ensure that the most current version of the verification report is used by Loan Product Advisor. If the Seller obtains an updated report, the Mortgage must be resubmitted to Loan Product Advisor to ensure assessment of the most current information
Maintain the verification report in the Mortgage file if the Last Feedback Certificate includes a feedback message that positive Borrower cash flow was identified
The expiration date of the verification report is reflected in feedback messaging complies with the age of documentation requirements in
Section 5102.4
.
