2017 Conventional Loan Guidelines
This BLOG On 2017 Conventional Loan Guidelines Was Written By Gustan Cho NMLS 873293
Borrowers who need Conventional Loans need to meet the minimum 2017 Conventional Loan Guidelines. Conventional Loans are also called Conforming Loans because they need to conform with Fannie Mae and/or Freddie Mac mortgage guidelines. Fannie Mae and Freddie Mac are the two mortgage giants that set the requirements for Conventional Loans. If a lender wants to sell their funded Conventional Loans to Fannie Mae or Freddie Mac, the loan needs to meet the minimum Conventional Loan Guidelines required by Fannie or Freddie.
Here are some bullet points of Conventional Loans:
- Conventional Loans can be used by borrowers needing financing on owner occupant homes, second home financing, and investment home properties.
- Conventional Loans need are also called conforming loans because they need to conform to Fannie Mae or Freddie Mac Conventional Loan Guidelines.
- Conventional Loan Guidelines require that minimum down payment for first time home buyers is 3% down payment on a home purchase and 5% down payment for non-first time home buyers.
- Borrowers have various options of the type of Conventional Loans such as 15 to 30 year fixed rate mortgages and adjustable rate mortgages.
- Conventional Loans do not require private mortgage insurance (PMI) if borrowers put 20% down payment on a home purchase.
- Private Mortgage Insurance can be canceled once the borrower’s equity in their home reaches 20% or 80% Loan To Value.
- Borrowers with higher credit scores, private mortgage insurance is normally lower than FHA mortgage insurance premium and benefits of Conventional Loans is that private mortgage insurance is not permanent like FHA Loans. Again, private mortgage insurance can be canceled once the Loan To Value reaches 80% LTV.
- Minimum credit scores to qualify for Conventional Loans is 620 FICO.
Qualification Requirements On Conventional Loans
Both Fannie Mae and Freddie Mac lowered the minimum down payment requirements to qualify for Conventional Loans to 3% down payment back in December 2014 in order to compete with the popular 3.5% down payment requirement on FHA Loans. Due to this lowering of down payment requirements for first time home buyers on Conventional Loans, more and more borrowers were gearing towards Conventional Loans.
Here Are The Benefits Of Conventional Loans:
- Conventional Loan Programs became a stronger competition to FHA Loan Programs due to not just the lower down payment requirements of 3% down payment on a home purchase but also because of qualifying for Conventional Loan after Chapter 7 Bankruptcy when you have mortgage part of bankruptcy which we will discuss more in detail later on this article.
- FHA requires annual FHA mortgage insurance premium on FHA Loans for the term of the FHA Loan.
- Homeowners can cancel Private Mortgage Insurance on Conventional Loans once you are at 80% Loan To Value.
- Private Mortgage Insurance is mandatory for borrowers who put less than 20% down payment on a home purchase.
- Conventional Loans are very credit sensitive.
- Borrowers with lower credit scores will definitely get a negative pricing adjustment and mortgage interest rates will be higher since Conventional Loans are not government loans.
- Pricing on Private Mortgage Insurance is not fixed like FHA Loans.
- Private Mortgage Insurance is based on the amount of equity, type of property, type of loan whether primary residence or investment property, and most importantly, the borrower’s credit scores.
- Private Mortgage Insurance is based on risk. Private Mortgage Insurance companies judge risk factor on the borrower’s credit scores.
- The higher the borrower credit scores, the lower the risk factor, thus the lower the Private Mortgage Insurance Premium.
- MGIC, Genworth Financial, RMIC, and Radian are some name brand well known Private Mortgage Insurance companies.
2017 Conventional Loan Guidelines On Loan Limits
2017 Conventional Loan Guidelines on maximum Loan Limits are higher than FHA Loans. Due to Higher Loan Limits On Conventional Loan Guidelines, many FHA Borrowers need to qualify for Conventional Loans but need to meet the Conventional Loan Guidelines Requirements. Here are the 2017 Conventional Loan Guidelines On Loan Limits:
- Conventional Loan Limits on a single family home is generally $424,100
- Loan Limits on Conventional Loans on two units is $543,000
- Conventional Loan Limits per 2017 Conventional Loan Guidelines is capped at $656,350
- The maximum Conventional Loan Limit on four unit properties is capped at $815,650
The above is for most areas in the United States. There are many areas throughout the country that have areas that are designated high cost areas. High cost areas have higher loan limits per 2017 Conventional Loan Guidelines. For example, Los Angeles County and many counties in California have loan limits of up to $636,150 for single family homes. Hawaii has higher housing costs and a four unit property in Honolulu, Hawaii has loan limits up to $1.2 million.
Credit Score Requirements Per 2017 Conventional Loan Guidelines
Here are the credit score requirements to qualify for Conventional Loans:
- Minimum credit score requirements to qualify for a Conventional Loan is 620 FICO.
- A 620 Credit Score is considered very low for conventional loans.
- To get the best Conventional Mortgage Interest Rates, a borrower needs a 740 FICO Credit Score.
- Loan Level Price Adjustments or LLPA is a pricing adjustment where the lower your credit scores are, there will be a pricing adjustment hit which means higher interest rates.
Debt To Income Ratio Requirements On Conventional Loans
Here are 2017 Conventional Loan Guidelines On Debt To Income Ratios:
- To get an approve/eligible per Automated Underwriting System via DU FINDINGS, debt to income ratios cannot exceed 45% DTI.
- To get an approve/eligible per Automated Underwriting System via LP FINDINGS, debt to income ratio cannot exceed 50% DTI.
2017 Conventional Loan Guidelines On Condominiums
Home buyers purchasing a condominium need to consider the following:
- Condo Buyers can only qualify for a FHA Loan and want to purchase a condominium, they need to make sure that the condominium complex is FHA Approved.
- Most condominium buyers think that just because the condominium is not FHA Approved that they can automatically qualify to purchase a condominium with a Conventional Loan.
- This is not the case and not true.
Here are the 2017 Conventional Loan Guidelines On Condominiums:
- The common area of the condominium complex needs to be fully complete and owned by the condominium unit owners or the condominium homeowners association.
- In order to qualify for a Fannie Mae and/or Freddie Mac condominium loan, the condominium complex needs to be classified as a warrantable condominium complex.
- Warrantable condominium complex means that at least 51% of the condominium units needs be owned by primary resident condominium unit owners or second home unit owners and not be owned by investment unit owners where the condominium units are rentals.
- The condominium complex needs to be in good financial condition with reserves and not negative or in financially in distress.
- Ninety percent of the condominiums must be sold and owned by condominium unit owners on existing condominium projects.
- A single enterprise and/or owner cannot be the owner of 10% or more of the condominium units.
- The condominium complex needs to be fully insured and/or insurable.
Second Home Financing & Investment Home Mortgages
Government loan programs such as FHA, VA, USDA only allow for primary owner occupant home financing. However, Fannie Mae and Freddie Mac allows for second home and investment home financing with Conventional Loans.
Here are the requirements to finance second homes and investment properties with Conventional Loans:
- 10% down payment is required for second home financing with Conventional Loans.
- 15% to 20% down payment is required for investment home financing with Conventional Loans.
- Multiple unit properties will require more down payment.
Qualification Requirements After Bankruptcy & Foreclosure
Here are the qualification requirements to qualify for Conventional Loans After Bankruptcy & Foreclosure:
- There is a four year waiting period to qualify for a Conventional Loan after a Chapter 7 Bankruptcy or Chapter 11 Bankruptcy from the discharged date of the bankruptcy or dismissal date of their bankruptcy.
- There is a two year waiting period to qualify for a Conventional Loan two years from the discharged date of the Chapter 13 Bankruptcy or four years from the dismissal date of their Chapter 13 Bankruptcy.
- If you have a mortgage part of your Chapter 7 Bankruptcy and if the mortgage is not reaffirmed, then there is a four year waiting period to qualify for a Conventional Loan from the discharged date of the Chapter 7 Bankruptcy.
- The foreclosure can happen after the discharged date and has no bearing on the four year waiting period.
- However, the foreclosure needs to happen and cannot be lingering in order for you to qualify.
- There is a four year waiting period to qualify for a Conventional Loan four years after the date of sale.
- There is a four year waiting period to qualify for a Conventional Loan after the recorded date of a deed in lieu of foreclosure.
- There is a seven year waiting period to qualify for a Conventional Loan after a standard recorded date of foreclosure.
Qualifying For Conventional Loan With Lender With No Overlays
The Gustan Cho Team at USA Mortgage has no overlays on Conventional Loans. Mortgage Borrowers who have gotten a last minute loan denial or are going through a stressful process and their current lender keeps on asking for conditions after conditions and are looking for a lender with no overlays, please contact Gustan Cho at 262-878-1965 or text Gustan Cho at 262-716-8151 for faster response. Mortgage Borrowers can also email us at email@example.com. We are available 7 days a week, evenings, weekends, and holidays.