Home Buyers Buying A House With A Conventional Loan

Buying A House With A Conventional Loan

Two of the most popular mortgage loan programs today in the United States are FHA Loans and Conventional Loans. HUD which is the United States Department of Housing and Urban Development is the parent of the Federal Housing Administration which is known by many as FHA. FHA is a government agency and is not a mortgage lender. FHA’s mission and purpose is not to originate or fund FHA insured mortgage loans but its purpose is to insure FHA mortgage loans that are originated and funded by FHA approved banks and mortgage lenders in the even the FHA Borrower defaults on their FHA Loans. In order for FHA to insure FHA Loans, FHA mortgage lenders need to be FHA approved as a HUD approved FHA mortgage lender and each FHA mortgage loan needs to meet FHA Guidelines . FHA Guidelines is listed on HUD 4000.1 FHA Handbook which is over 800 pages of rules and regulations on FHA mortgage lending guidelines. FHA Guidelines change and the changes is updated by HUD through mortgagee letters as changes comes up. FHA will not insure FHA Loans that do not meet FHA mortgage lending guidelines.

Fannie Mae and Freddie Mac are the two mortgage giants that set mortgage lending standards and mortgage lending guidelines on Conventional Loans. Conventional Loans are often referred to as Conforming Loans because they need to Conform to Fannie Mae and Freddie Mac mortgage lending guidelines and requirements. There are times where home buyers need to go with Conventional Loans instead of FHA Loans. FHA Loans are only for owner occupied primary mortgage loans only. Home Buyers Buying A House With A Conventional Loan can purchase second homes and investment homes with Conventional Loans where they will not be eligible to purchase second homes and investment properties with FHA Loans.

Home Buyers Buying A House With A Conventional Loan: FHA Versus Conventional Loan

FHA Loans are not available for second home financing and investment home financing. FHA Loans are only for owner occupant primary home financing only. Conventional Loans allows for second home financing and investment property financing. In general, FHA Loans have less stringent mortgage lending requirements than Conventional Loans. FHA requires a minimum of 580 FICO credit scores versus 620 FICO credit scores required for Conventional Loans. Maximum debt to income ratios permitted with FHA Loans is 56.9% DTI versus 45% DTI with Conventional Loans. There is a two year waiting period to qualify for a FHA Loan after a Chapter 7 Bankruptcy discharged date with a FHA Loan versus a four year waiting period with a Conventional Loan. There is a three year waiting period to qualify for FHA Loan after a foreclosure, deed in lieu of foreclosure, and short sale versus a four year waiting period after a short sale and/or deed in lieu of foreclosure to qualify for a Conventional Loan. There is a seven year waiting period to qualify for a Conventional Loan after a foreclosure.

If you have a Chapter 13 Bankruptcy discharge, there is no waiting period after a Chapter 13 Bankruptcy discharged date to qualify for a FHA Loan. There is a two year mandatory waiting period to qualify for a Conventional Loan after a Chapter 13 Bankruptcy discharged date.

Home Buyers Buying A House With A Conventional Loan: Mortgage Part Of Bankruptcy

Home Buyers who had a mortgage or multiple mortgages as part of their Chapter 7 Bankruptcy can now qualify for a Conventional Loan four years from the discharged date of their Chapter 7 Bankruptcy discharged date even though the foreclosure that was part of their Chapter 7 Bankruptcy was recorded at a later date. As long as their foreclosure has been finalized after the Chapter 7 Bankruptcy discharged date, the waiting period is four years from the date of the Chapter 7 Bankruptcy discharged date. This is not the case with FHA Loans. With FHA Loans, if you had a mortgage or mortgages as part of your Chapter 7 Bankruptcy, there is a three year waiting period from the recorded date of the foreclosure and/or date of the sheriff’s sale of the property that the mortgage note was included in the Chapter 7 Bankruptcy. Many mortgage lenders are in no major hurry to change the deed out of the borrowers name into their name and many folks who had a mortgage or mortgages as part of their Chapter 7 Bankruptcy are left in a situation where their waiting periods did not even start yet because the deed has not transferred out of their names yet. This new Fannie Mae Guidelines On Mortgage Part Of Bankruptcy opens up many doors for home buyers who had a mortgage part of their bankruptcy but the foreclosure was not recorded at a much later date.

If you are looking for a Conventional Mortgage Lender who has no lender overlays, please contact me at 262-716-8151 or email me at gcho@gustancho.com. I am available 7 days a week, evenings, weekends, and holidays to take your calls and answer any questions you may have.

Home Buyers Buying A House With A Conventional Loan: Mortgage Rates On Conventional Loans

Mortgage Rates on Conventional Loans are generally higher than mortgage interest rates on government loans. Government Loans such as FHA Loans,  VA Loans, USDA Loans are backed and insured by the government entity against default of the mortgage loan borrower but Fannie Mae and Freddie Mac does not guarantee Conventional Loans against borrowers defaulting on Conventional Loans. All Conventional Loans that have higher than 80% loan to value are required to have private mortgage insurance . Private mortgage insurance is what guarantees the mortgage lender in the event if the Conventional mortgage loan borrower defaults on their conventional loan. Conventional Loan borrowers who put a down payment of at least 20% down payment, there is no private mortgage insurance required. Mortgage Rates on Conventional Loans depends on the borrower’s credit scores and the amount of down payment the home buyer puts down on their home purchase. To get the best Conventional Mortgage Interest Rates, the conventional mortgage borrower should have at least a 740 FICO credit score and have 20% down payment. Prior bad credit or a prior bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale has no bearing or impact on a borrower’s mortgage rates.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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