Conforming Loan Requirements And Guidelines On Home Purchase
This BLOG On Conforming Loan Requirements And Guidelines On Home Purchase Was UPDATED And PUBLISHED On July 2nd, 2020
Conforming Loan Requirements for 2018 for the most part are the same as 2017 with three major important changes.
- The first change is that the two year waiting period after short sale and deed in lieu of foreclosure with 20% down payment is no longer in effect
- On the positive note, borrowers who have a mortgage part of bankruptcy, the waiting period is four years from the discharged date of the bankruptcy
- The recorded date of the foreclosure even if the foreclosure is recorded at a later date after the bankruptcy does not matter
- The housing event (foreclosure, deed in lieu of foreclosure, short sale) needs to be finalized but the age of the date does not matter
In this article, we will discuss and cover Conforming Loan Requirements And Guidelines On Home Purchase.
Down Payment Requirements On Conforming Loans
With the exception of VA and USDA Loans, all mortgage programs require down payment.
- The 3% down payment for first time home buyers is now available on conforming loans
- Homebuyers can qualify for a conventional loan with 3% down payment if they are first time home buyers
Per Fannie Mae and Freddie Mac Guidelines, first time home buyers is defined as someone who did not own a home for the past least three years.
Credit Score Conforming Loan Requirements
The minimum credit score of conventional loan requirements is still 620.
Conventional Mortgage Rates have a direct impact with the borrower’s following:
- credit scores
- type of property
- loan to value
To get the best conventional mortgage rates, borrowers need the following:
- 740 credit score
- 75% Loan To Value
- The property needs to be a single-family home
The lower borrower’s credit score, the lender views as a riskier borrower:
- If lenders take on risks, mortgage rates will be higher
Borrowers with the bare minimum 620 credit score will most likely get the highest rates on conventional loans.
Conforming Loan After Short Sale And Deed In Lieu
The two year waiting period after short sale and deed in lieu of foreclosure with 20% down payment to qualify for a conventional loan is no longer in effect:
- The new conforming loan requirements to qualify after short sale and deed in lieu of foreclosure has been extended to 4 years
- Recorded date of the deed in lieu of foreclosure needs to be four years
4 years from the date of short sale which is reflected in the HUD Settlement Statement with 5% down payment.
Conforming Loan Requirements With Mortgage Part Of Bankruptcy
Borrowers who have a mortgage or mortgages as part of bankruptcy, the waiting period to qualify for a conventional loan is four years from the discharged date of bankruptcy. Not the recorded date of foreclosure.
- Many home buyers who had a mortgage part of bankruptcy can now qualify for a conventional loan is 4 years from the discharge date of the Chapter 7 Bankruptcy
- Do not have to worry about going by the recorded date of the foreclosure, deed in lieu, short sale
- Mortgage cannot be reaffirmed after bankruptcy
Housing Event needs to be finalized.
Waiting Period After Chapter 13 Bankruptcy
Conventional Loan Requirements after Chapter 13 Bankruptcy is a 2-year waiting period from the discharge date of Chapter 13 Bankruptcy. There is a 4 year waiting period from the dismissal date of the Chapter 13 Bankruptcy to qualify for conforming loans:
- There are consumers who file Chapter 13 Bankruptcy where they get the Chapter 13 Bankruptcy dismissed and not complete the repayment program
Whether it was a voluntary dismissal or the Chapter 13 dismissal was due to non-payment, both Fannie Mae and Freddie Mac require a four year wait period after dismissal.
Conforming Loan After Foreclosure
Conventional Loan Requirements after a foreclosure is 7 years from the recorded date of the foreclosure.
- Conforming Loan Requirements after a foreclosure is different than qualifying for a conventional loan after a deed in lieu of foreclosure and/or short sale
- With FHA Loans, the waiting period to qualify for an FHA loan is 3 years after the recorded date of the foreclosure, deed in lieu of foreclosure, and the recorded date of their short sale which is reflected on their HUD Settlement Statement
- The waiting period after bankruptcy is 2 years from the discharge date of the Chapter 7 Bankruptcy for an FHA Loan
However, both Fannie Mae and Freddie Mac have a longer waiting period after a foreclosure than they do after a deed in lieu of foreclosure and/or short sale.
Conforming Guidelines On Student Loans
One great advantage with conforming loan requirements on student loans is that Fannie Mae and Freddie Mac allow Income-Based Repayment (IBR) that report on consumer credit reports to be used as monthly student loan debts. This is not the case with other loan programs. For example, if a physician with a $300,000 outstanding student loan balance and has an IBR Payment of $80 per month, that $80 per month IBR payment can be used as the monthly student loan debt on conventional loans.
Borrowers who need to qualify for conforming loans with a direct lender with no overlays, please contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for a faster response. Borrowers can also email us their case scenario questions to [email protected] We are available 7 days a week, evenings, weekends, and holidays.