Conventional Loan After Deed In Lieu Of Foreclosure Or Short Sale

This BLOG On Qualifying F0r Conventional Loan After Deed In Lieu Of Foreclosure Or Short Sale Was UPDATED On January 8th, 2019

Qualifying For Conventional Loan After A Deed In Lieu Or Short Sale Versus Standard Foreclosure:

Fannie Mae and Freddie Mac are the two mortgage giants that control and regulate Conventional Loan Guidelines.

There are two types of mortgage loan programs:

Government Loans
Conventional Loans

In this article, we will cover and discuss qualifying for a conventional loan after housing event.

Government Loans

Government Loans Are The Following:

FHA Loans
VA Loans
USDA Loans

Conventional Loan After Deed In Lieu Of Foreclosure Or Short Sale Versus Foreclosure

Conventional Loans have different waiting period guidelines after a deed in lieu of foreclosure versus standard foreclosure.

Waiting Period to qualify for Conventional Loan After Deed In Lieu Or Short Sale is shorter than borrowers who have a standard foreclosure
Government Loans have the same waiting period after foreclosure, deed in lieu of foreclosure and short sale

However, conventional loans classify short sale and deed in lieu of foreclosure waiting period differently than standard foreclosure.

Conventional Loans Versus Other Loan Programs

Here are the waiting period requirements to qualify for Conventional Loan After Deed In Lieu Or Short Sale Versus Foreclosure:

4 Year Waiting Period After Deed In Lieu Of Foreclosure
4 Year Waiting Period After Short Sale
7 Year After Recorded Date Of Deed In Lieu Of Foreclosure
4 Year Waiting Period To Qualify For Conventional Loans After Chapter 7 Bankruptcy discharged date
2 Year Waiting Period To Qualify For Conventional Loans After Chapter 13 Bankruptcy discharged date

Conventional Loans Versus FHA Loans

Conventional loan programs are for borrowers with better credit and financial profiles.

Conventional loan programs are credit-sensitive unlike FHA mortgage loan programs
The higher credit scores, the better the conventional mortgage rate
Conventional loan programs have stricter guidelines than FHA mortgage loans
For example, borrowers can qualify for an FHA loan with a 500 FICO
However, the lowest credit score to qualify for a conventional loan is 620 FICO
A 620 FICO credit score is considered a very low score for conventional borrowers
The conventional borrower will probably get a pretty high mortgage rate

Homebuyers can now qualify for a conventional loan after a deed in lieu of foreclosure and/or short sale after a 4-year waiting period. The waiting period start clock is from the recorded date of the deed in lieu of foreclosure and/or short sale.

Other Disadvantages Of Conventional Loan After Deed In Lieu Of Foreclosure

FHA mortgage loan programs will allow the back end debt to income ratios as high as 56.9%.

With conventional loan programs, having a 50% debt to income ratio will probably be pushing it to get an approve/eligible per Automated Underwriting System
The Automated Underwriting System will compute and analyze the borrowers’ overall credit history, asset, debt, and income and determine what the maximum debt to income ratio will be capped at

Conventional loan programs are geared for borrowers who have stronger credit profiles and assets.

Waiting Period To Qualify For Conventional Loan After Deed In Lieu Of Foreclosure Or Short Sale Versus Bankruptcy

With FHA mortgage loan programs, there is a 2-year waiting period after Chapter 7 Bankruptcy discharged date to qualify for an FHA mortgage loan.

The waiting period is 3 years for those borrowers who have had a prior foreclosure, deed in lieu of foreclosure, or short sale

They also need to have re-established credit and no late payments after the bankruptcy or foreclosure, have rental verification for lower credit score borrowers.

Waiting Period To Qualify For Conventional Loan After DIL, Foreclosure, Bankruptcy, And Short Sale

Waiting period requirements for conventional loan programs are much stricter than FHA mortgage loan programs.

There is a 7-year waiting period to qualify for a conventional loan after a foreclosure or bankruptcy
Borrowers can qualify for a conventional loan after four years after a deed in lieu of foreclosure or short sale
These are Fannie Mae guidelines and are the bare minimum requirements
Many conventional lenders have overlays

Besides having the 5% down payment, conventional lenders will want to see re-established credit as well as zero late payments after the deed in lieu of foreclosure as well as the short sale.

Update On Waiting Period For Conventional Loan After A Deed In Lieu And/Or Short Sale

Effective August 2015, the waiting period after a deed in lieu of foreclosure and short sale to qualify for a conventional loan has been extended to a 4 year waiting period with a 5% down payment and re-established credit with a minimum of 620 FICO credit score.

The two-year waiting period after a deed in lieu of foreclosure and short sale to qualify for a conventional loan with 20% down payment is no longer in effect

Update On Mortgage Part Of Bankruptcy

Borrowers who had mortgage part of Chapter 7 Bankruptcy can qualify for Conventional Loans four years after the discharged date of the Chapter 7 Bankruptcy. The foreclosure, deed in lieu of foreclosure, a short sale has to be completed but the waiting period start date starts from the Chapter 7 Bankruptcy discharged date. The housing event date after the Chapter 7 Bankruptcy discharge does not matter.

Gustan Cho Associates is a five-star mortgage lender with no lender overlays licensed in multiple states. Borrowers who need to qualify for government and/or conventional loans with no lender overlays please contact us 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.

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