Conventional Mortgages

Conventional Mortgages

There is a wide variety of conventional mortgages that is catered to each individual’s needs.

What is Conventional Mortgages

The minimum credit score requirements to qualify for conventional mortgages per Fannie Mae and Freddie Mac Agency Guidelines is 620 FICO :

  • Debt To Income Ratio can be not greater than 50% DTI to get an approve/eligible per Automated Underwriting System
  • The minimum down payment requirements for a conventional purchase loan is 3% down payment for first time home buyers with Fannie Mae and Freddie Mac
  • The 3% down payment only applies to homebuyers for first time homebuyers
  • A first time homebuyer is defined buyers who did not own a home in the past 3 years
  • 5% down payment if they had ownership in a home in the past 3 years  
  • The 3% down payment conventional mortgage program was launched by Fannie Mae in order to compete with HUD’s recent reduction in FHA annual mortgage insurance premium reduction from 1.35% to 0.85% and in order to compete with FHA 3,5% down payment
  • There are conventional mortgages that do not require the borrower to pay separate private mortgage insurance.
  • The no private mortgage insurance requirement is offered to borrowers
  • It is called the LPMI ( Lender Paid Mortgage Insurance) 
  • The is a one time upfront private mortgage insurance program

Homebuyers with less than 20% down payment can qualify for conventional loans with no monthly PMI as long as they pay a one time upfront private mortgage insurance premium.

Second Homes And Investment Property Conventional Mortgages

What are Second Homes And Vacation Home Conventional Mortgages

To qualify for a second home or vacation home mortgage, a 10% down payment is required as well as a 620 FICO credit score.

Minimum down payment requirements for an investment home mortgage loan is 15% down payment.

  • However, if the investment home borrower can use 75% of the potential rental income from the subject investment home purchase in order
  • In order to do so, the borrower needs to put a 25% down payment on an investment home property

HomePath Mortgage Conventional Loans

Unfortunately, Fannie Mae has discontinued the HomePath Loan and HomePath Renovation Mortgage program. 

  • Home buyers can still purchase a HomePath property
  • But the HomePath mortgage program has been discontinued
  • Alternative financing for HomePath properties includes 3% down payment conventional loan, 3.5% down payment FHA Loan
  • 0% down payment VA loan if you are a veteran
  • Or 0% down payment USDA loan if the property is in a USDA approved area and you qualify for a USDA loan

Gustan Cho Associates offers non-QM loans on primary owner-occupant, second homes, and investment properties.

Qualifying For Conventional Mortgages After Bankruptcy And Foreclosure

How Qualifying For Conventional Mortgages After Bankruptcy And Foreclosure

Fannie Mae recently made some changes with regards to waiting periods after a deed in lieu of foreclosure and short sale. 

  • Fannie Mae treats deed in lieu of foreclosure and short sale differently than a standard foreclosure versus other mortgage  programs
  • For example, HUD treats a deed in lieu of foreclosure and short sale the same as a standard regular foreclosure
  • The waiting period to qualify for an FHA loan after a deed in lieu of foreclosure and/or a short sale is the same as a standard foreclosure
  • 3 years after the date of the short sale
  • The waiting period start date is reflected on the HUD-1 Settlement Statement
  • 3 years after the recorded date reflected on public records for a deed in lieu of foreclosure and standard foreclosure
  • However, with Fannie Mae, rules are different
  • There  is a four year waiting period to qualify for a conventional loan after a deed in lieu of foreclosure
  • The waiting period start date is four years from the recorded date of the foreclosure
  • To qualify for a conventional loan after a short sale is four years from the date of the short sale
  • The waiting period clock to qualify for conventional loan after a short sale starts from the date that is shown on the HUD-1 Settlement Statement of your short sale
  • The waiting period to qualify for a conventional loan after a standard regular foreclosure is 7 years from the recorded date of the foreclosure
  • The waiting period start date is the recorded and stamped date by the county recorder of deeds office
  • The recorded date is reflected on public records

Gustan Cho Associates has no lender overlays on conventional loans.

Qualifying For Conventional Loans After Bankruptcy

Fannie Mae has minimum waiting period requirements for borrowers to qualify for a conventional loan after a bankruptcy discharge date:

  • There is a four year mandatory waiting period after a Chapter 7 discharge date to qualify for a conventional loan
  • There is a mandatory 2 year waiting period after a Chapter 13 discharge date to qualify for a conventional loan
  • If your Chapter 13 has been dismissed instead of discharged, then the waiting period is 4 years after a Chapter 13 dismissal date

Conventional Lenders do want to see those with a prior bankruptcy not to have been late with any payments and like to see re-established credit history.

Mortgage Part Of Bankruptcy

What is Mortgage Part Of Bankruptcy

If you have a prior mortgage included in Chapter 7 bankruptcy, the waiting period is 4 years from the bankruptcy discharge date to qualify for a conventional mortgage. This holds true even though the deed of your home has not been transferred after the discharge date of Chapter 7 bankruptcy.  This is a new Fannie Mae mortgage lending guideline.  Prior to this new regulation, homeowners who had a prior mortgage included in Chapter 7 bankruptcy could not qualify until they met the proper waiting period after foreclosure, deed in lieu of foreclosure or short sale. The waiting period clock did not start until the recorded date of the housing event. The waiting period start date was when the lender has transferred the deed out of the borrower’s name into the bank’s name. The foreclosure and/or deed in lieu of foreclosure had to be reflected on public records.  Now, the waiting period clock starts from the discharge date of the Chapter 7 bankruptcy. This holds true regardless of when the actual deed was transferred out of the homeowners name. The deed needs to be finalized and out of the homeowners name to determine the waiting period start date.

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