This guide covers Fannie Mae waiting period after deed-in-lieu and short sale on conventional loans. Freddie Mac and Fannie Mae are the two mortgage giants that set conventional mortgage guidelines. Conventional loans are also referred to as Conforming loans. The reason they are called conforming loans is that they need to conform to Fannie Mae or Freddie Mac Guidelines.
What Are Conventional Loans
Conventional loans are not guaranteed by any government agencies. Then why do lenders need to conform to Fannie Mae or Freddie Mac mortgage guidelines? The reason is if lenders do not conform to Fannie or Freddie guidelines, they cannot sell the conforming loans they originate and fund to the secondary market. Fannie Mae and Freddie Mac do not purchase mortgages that do not meet their conforming guidelines.
Qualify for conventional loans, click here
Fannie Mae Waiting Period After Deed-in-Lieu Versus Regular Foreclosure
The waiting periods for qualifying for a conventional loan backed by Fannie Mae after a deed-in-lieu of foreclosure or a short sale are different than a regular foreclosure on conventional loans. Suppose you have a deed-in-lieu of foreclosure on your credit history. In that case, the waiting period is four years before you can qualify for a conventional loan through Fannie Mae. If you had a short sale, the waiting period can vary depending on your circumstances. Generally, you may be eligible for a conventional loan after 2 years if you demonstrate extenuating circumstances leading to the short sale. If there are no extenuating circumstances, you may have to wait four years before becoming eligible for a conventional loan.
Qualifying For Conforming Loans After a Housing Event
The Federal Housing Finance Agency (FHFA) is the regulatory agency in charge of Fannie Mae and Freddie Mac. Conforming loans have separate waiting period requirements after a deed in lieu of foreclosure and short sale versus standard foreclosure.
Homeowners who had a prior deed in lieu of foreclosure or a prior short sale in the past four years can now qualify for a conventional loan after four years.
5% down payment is required and need an approve/eligible per DU/LP FINDINGS. Even with an Automated Underwriting System approval, some lenders may have overlays. Waiting period after regular foreclosure is seven years. The waiting period clock does not start until the deed has been transferred out of the homeowners name or date of the short sale.
Qualify for conforming loans after housing event, click here
Lender Overlays on Conventional Loans
Overlays are mortgage guidelines that are above and beyond those of Fannie Mae or Freddie Mac imposed and implemented by individual lenders. Mortgage loan originators do not know everything mortgage loan program either due to the enormous amount of rules and regulations. There are not too many conventional mortgage companies that offer conventional loans with no overlays. Gustan Cho Associates is a national lender with no overlays on conventional loans. Official approval is the AUTOMATED UNDERWRITING SYSTEM DU APPROVE ELIGIBLE. As long as the information stated on the mortgage application can be verified and confirms and all conditions met, borrowers will close on their conventional loan with Gustan Cho Associates.
Examples of Mortgage Lender Overlays
Home Buyers are interested in pursuing a conventional loan after a four-year waiting period after a deed in lieu of foreclosure or short sale can qualify for conforming loans with no lender overlays at Gustan Cho Associates. Here are some examples of overlays lenders can require:
- 12 months rental verification
- Minimum of 3 to 4 credit tradelines that have been seasoned for a minimum of 12 months and sometimes 24 months
- Minimum credit score requirements
- No late payments in the past 12 to 24 months
- Some lenders may require no late payments after bankruptcy or housing event
- Reserves
- Compensating factors
Down Payment Required After Fannie Mae Waiting Period After Deed-in-Lieu and Short Sale
The old Fannie Mae waiting period after deed-in-lieu and short sale is different than the new 2019 Fannie Mae waiting period after deed-in-lieu and short sale: Old Fannie Mae waiting period after deed-in-lieu and short sale was the following:
- The 20% down payment was mandatory to qualify for a conventional loan after two years of deed-in-lieu of foreclosure and short sale
- The old Fannie Mae waiting period after deed-in-lieu and short sale was two years
- If the borrower only has a 10% down payment, then the waiting period is four-year with the old Fannie Mae Guidelines
- For down payments less than 10%, the waiting period is 7 years
- Conventional mortgage lending guidelines are stricter than HUD lending guidelines
- For anyone that had a foreclosure or bankruptcy, the mandatory waiting period is 7 years for a conventional loan
- For USDA and FHA loans foreclosure, deed-in-lieu of foreclosure, short sale all have a three-year waiting period
VA loans only require a two year waiting period after foreclosure, deed-in-lieu, short sale. Please note that these waiting periods and eligibility criteria may change over time, and different lenders might have their specific requirements. It’s essential to consult with a mortgage professional or a lender for the most up-to-date information and to discuss your situation. Additionally, Fannie Mae’s guidelines may have evolved since my last update, so verifying the current requirements is important if you are considering a conventional loan.
Click here for eligible for conforming loans
Fannie Mae Waiting Period After Deed-in-Lieu and Short Sale
In August 2014, Fannie Mae has eliminated the conventional loan program after 2-year waiting period after a deed-in-lieu of foreclosure and short sale with a 20% down payment. Homebuyers with a prior short sale or deed in lieu of foreclosure can now qualify for a conventional loan four years after a deed-in-lieu of foreclosure or short sale with 5% down payment on a home purchase.
First-time homebuyers and Homebuyers who had no ownership in a home in the past three years can now qualify for a conventional loan with 3% down payment.
To qualify for a conventional loan after a standard regular foreclosure, the waiting period remains at a 7 year waiting period. Homebuyers who need a lender with no overlays on conventional and government loans can contact us at Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays. We close 100% of all of our pre-approvals because our pre-approvals are full credit mortgage loan approvals fully underwritten and signed of by our mortgage underwriters.
