Conforming Versus Non-Conforming Mortgage

Conforming Versus Non-Conforming Mortgage Loan Programs

Gustan Cho Associates are mortgage brokers licensed in 48 states

This BLOG On Conforming Versus Non-Conforming Mortgage Loan Programs Was UPDATED On April 27th, 2019

Home Buyers and homeowners have a variety of mortgage loan programs to choose. There are conforming versus non-conforming mortgage loan programs. Conforming Loans needs to conform to government and/or conventional mortgage guidelines. Depending on the borrowers credit profile and the type of property they want to purchase and/or refinance dictates whether they qualify for conforming versus non-conforming mortgage programs:

Lenders can offer government and conventional loan programs. Government and Conventional Loans are called conforming loans because they need to conform to FHA, VA, USDA, FANNIE MAE, FREDDIE MAC mortgage guidelines. Jumbo Loans, Non-QM Loans, Bank Statement Loans, and Portfolio mortgage loan programs are called non-conforming loans because they do not conform to agency guidelines.

  • The Gustan Cho Team are direct lenders with no overlays on government and conventional loans
  • We are also non-conforming lenders and experts on non-qm loans, bank statement loans, jumbo mortgages, and alternative financing
  • Loan Officers with The Gustan Cho Team issues pre-qualification letters 7 days a week, including evenings and holidays
  • Borrowers can either apply online or contact the mortgage loan originator
  • One of our licensed loan officers can take mortgage application over the phone
  • Most automated approvals via the Automated Underwriting System unless it requires manual underwriting is required prior to issuance of pre-qualifications
  • There are lenders that have no mortgage lender overlays on all government and conventional loan programs such as FHA Loans, USDA Loans, VA Loans, and conventional loan programs
  • With lenders with no lender overlays, automated approval is final mortgage approval if borrowers can clear conditions stated on AUS
  • Unique or difficult mortgage files are first reviewed by a mortgage underwriter before issuance of pre-approval 
  • Reputable and experienced loan officers will qualify a borrower very thoroughly
  • Loan Officer will review borrowers credit and financial profile so there are no issues during the mortgage process leading to last minute mortgage loan denial
  • A loan officer who properly pre-approves a borrower should have no issues in closing in time
  • They should have no issues during the mortgage approval process
  • We are both purchase and refinance mortgage bankers
  • Gustan Cho Associates have experts in all mortgage loan programs

Income Is Most Important Factor To Qualify For Home Loan

As long as borrowers have documented income, a loan officer who works for a mortgage company who have little to no lender overlays can not just close the loan but close it on time:

  • Borrowers with credit issues such as a bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, late payments, unsatisfied collection accounts, or other forms of bad credit can still qualify for a mortgage loan
  • Borrowers need to meet the proper mandatory waiting period after bankruptcy and/or housing event
  • Need timely on all of their payments for the past 12 month
  • Re-established credit after bankruptcy and/or housing event is a must
  • We help borrowers with prior bad credit and recent late payments by helping them improve their credit scores so they can qualify for a loan
  • Once borrowers contact us, they are our client and a lifelong relationship starts

Fixed Rate FHA Mortgage Loan Programs

The Gustan Cho Team offers 30 year and 15 year fixed rate FHA mortgage loans.  Require a 3.5% down payments and 580 credit scores:

FHA Mortgage Lending Guidelines:

  • 500 to 579 scores require 10% down payment
  • 3.5% down payment on FHA loans over 580 credit scores with no lender overlays
  • Maximum back end debt to income ratios for borrowers with credit scores between 580 and 620 is 43% to get AUS Approval
  • Debt to income ratios 46.9% front end and 56.9% back end for FHA borrowers with credit scores higher than 620 to get AUS Approval
  • Multiple non occupied co-borrowers are allowed on FHA loans
  • Up to 6% sellers concession allowed with FHA loans
  • Open collections, late payments, bank overdrafts, judgments, tax liens, and other prior bad credit allowed
  • Collection and charged off accounts do not have to be repaid or settled to qualify for FHA Loans
  • Bankruptcy, Foreclosure, Deed in Lieu of Foreclosure, Short Sales are allowed
  • However, need to adhere to HUD guidelines concerning mandatory waiting period requirements
  • Manual underwrites available on FHA Loans on borrowers who cannot get an automated approval via the Automated Underwriting System
  • 100% gifts allowed on a home purchase by a family member 
  • 24-hour mortgage loan underwrites and mortgage approvals. 14-day closings if requested
  • Closings in 14 days if it is a rush file
  • Most closings are in 30 days or less
  • No waiting period for borrowers with a short sale as long as they were current on their loan until the day of the sale

Conventional Mortgage Loan Programs

Conventional Mortgage Lending Guidelines:

  • Minimum 620 credit scores on conventional mortgage loans with no lender overlays
  • Maximum 50% debt to income ratio
  • No overlays. As long as borrowers get an approve/eligible per DU or LP FINDINGS
  • 5% down payment conventional loan with credit scores of 620 with no mortgage insurance required
  • 3% sellers concession allowed on a home purchase
  • Lenders credit towards closing costs in lieu of higher mortgage rates
  • Second home conventional loans require 10% down payment
  • Investment home conventional loans require 20% down payment
  • Conventional loan after 4 years after deed in lieu and/or short sale with 5% down payment and no lender overlays
  • Prior bad credit okay
  • As long as borrowers get an automated approval via AUS, The Gustan Cho Team has no mortgage overlays

UPDATE On HomePath Mortgage Loan Programs

Fannie Mae no longer offers HomePath Mortgage Loan Programs. However, home buyers can still purchase Fannie Mae HomePath properties. However, need to seek other sources of financing whether they are FHA Loans, FHA 203k Loans,  Conventional Financing or Non-QM Mortgages .

VA Loans With No Lender Overlays

Most lenders have mortgage overlays on VA Loans. Why is it that most lenders require 620 credit scores and 45% debt to income ratios by VA Borrowers when the VA does not have a credit score and/or debt to income ratio requirements? The reason is due to VA lender overlays. The Gustan Cho Team has no lender overlays on VA Loans:

  • 100% financing
  • No minimum credit score requirements
  • No debt to income ratio caps on VA Loans
  • The funding fee can be rolled into the loan
  • Open collections, charge offs, late payments, and other prior bad credit allowed
  • 2 year waiting period after bankruptcy and housing event
  • 4% sellers concessions allowed
  • Veteran home buyers can qualify for VA Loans during Chapter 13 Bankruptcy Repayment Period
  • There is no waiting period after Chapter 13 Bankruptcy discharged date to qualify for VA Home Loans

Alternative And NON-QM Jumbo Loans

There are Jumbo Conforming Versus Non-Conforming Mortgage Loans. Traditional Jumbo Lenders require 700 credit scores, 41% DTI, and full documentation. Conforming Versus Non-Conforming Mortgage on Jumbo Mortgages is that Jumbo Non-Conforming Loans do not require higher credit scores and income tax returns.

Gustan Cho Associates offers non-qm jumbo mortgages with 10% to 20% down payment and 620 credit scores. We also offer non-qm jumbo mortgages for self-employed borrowers where income tax returns are not required. Down payment requirements on non-qm jumbo mortgages depend on borrowers credit scores. Income Tax Returns are not required on non-qm bank statement mortgage loan programs for self-employed borrowers. 24 months bank statements are averaged to get qualified monthly income. Debt To Income Ratio caps at 50% with compensating factors. There is no waiting period after housing event and/or bankruptcy with non-qm loans. All non-qm loans do not require private mortgage insurance. Verification Of Rent and/or Verification Of Mortgage is required on all bank statement mortgage loan programs.

  • 90% loan to value Jumbo Loans now available with no mortgage insurance premium
  • Super Jumbo Loans for loan sizes over $3 million
  • Specialty homes with no comparable sales
  • The appraisal will go by the cost approach

Condotel And Non-Warrantable Condo Loans

Condotel and Non-Warrantable Condo Financing are non-conforming loans.

  • Condotel Financing with 25% down payment
  • Non-warrantable condo loans with 20% down payment
  • 500 minimum square feet
  • Adjustable Rate Mortgages
  • 680 credit scores
  • 43% DTI
  • Reserves required
  • No studios
  • One bedroom and full kitchen
  • Minimum loan size $150,000

FHA 203K Mortgage Loans

HUD, the parent of FHA, has an acquisition and construction loan program for owner occupant home buyers. Home Buyers can now purchase fixer uppers with FHA 203k Loans. There are two types of FHA 203k Rehab Loans:

  1. FHA Streamline 203k Loans
  2. Standard FHA 203 Loans

203K Streamline Loans:

  • Up to $35,000 in rehab funding
  • One closing
  • Cannot do structural changes

Full 203K Loans:

  • No construction budget
  • Can do structural changes
  • Gut rehab projects allowed

Multi-Unit Financing

  • FHA 2-4 unit mortgage loans require 3.5% down payment
  • 85% of potential rental income can be used for borrower’s extra income on rental units
  • No landlord experience required
  • Conventional 2-4 unit mortgage loans require 15% down payment
  • 75% of potential rental income can be used as borrower’s extra income to qualify for debt to income ratios on conventional multi unit mortgage programs
  • No landlord experience required
  • Reserves required

There are major differences in Conforming Versus Non-Conforming Mortgage. Viewers who need further clarification on the differences in Conforming Versus Non-Conforming Mortgage can contact us at The Gustan Cho Team at

Home Buyers who need to qualify for mortgage with direct lender with no overlays on government and conventional loans can contact us at The Gustan Cho Team at 800-900-8569 or text us for faster response. Or email us at

This BLOG On Conforming Versus Non-Conforming Mortgage Was UPDATED On April 27th, 2019

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One Comment

  1. It’s interesting to know that even with bad credit scores, as long as income is documented, a person will still be eligible for a loan. I will keep that in mind in case my finances get a bit bad soon. Medical expenses overlapping with rent and loan interests makes me think that getting a non-conforming loan program would be a good way to make sure I stay afloat. Alex Carlucci of Gustan Cho Associates videos has been very informative.

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