Conventional Mortgages

Conventional Mortgages

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

  • Minimum credit score requirements to qualify for conventional mortgages per Fannie Mae and Freddie Mac conforming mortgage guidelines is 620 FICO credit scores
  • Debt To Income Ratio can be not greater than a 45% DTI with Fannie Mae and 50% DTI with Freddie Mac to get an approve/eligible per Automated Underwriting System
  • Minimum down payment requirements for a conventional purchase loan is 3% down payment for first time home buyers with Fannie Mae and the 3% down payment down payment home purchase program available is available with Freddie Mac but only applies to home buyers who did not own a home in the past 3 years
  • Conventional Borrowers need 5% down payment if they had ownership in a home in the past 3 years  
  • The 3% down payment conventional mortgage program was recently announced by Fannie Mae in order to compete with FHA’s recent reduction in FHA annual mortgage insurance premium reduction from 1.35% to 0.85%.
  • [Update] Last announcement 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 conventional mortgage loan borrowers and is called the LPMI ( Lender Paid Mortgage Insurance) conventional loans.
  • The is a one time upfront private mortgage insurance program where home buyers 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 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.

Investment Property Conventional Mortgages

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

  • However, if the investment home mortgage borrower needs to use 75% of the potential rental income from the subject investment home purchase in order to qualify for additional income, then 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.

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 than other mortgage loan programs.  For example, FHA treats a deed in lieu of foreclosure and short sale the same as a standard regular foreclosure. 
  • The waiting period to qualify for a FHA insured mortgage loan after a deed in lieu of foreclosure and/or short sale is the same as a standard foreclosure.
  • 3 years after the date of the short sale which is reflected on the HUD-1 Settlement Statement and 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. 
  • To qualify for a conventional loan after a deed in lieu of foreclosure 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 that was recorded and stamped by the county recorder of deeds office and is reflected on the public records. 
  • Minimum down payment requirements for conventional loans are 3% down payment for first time home buyers.
  • First time home buyers are defined as home buyers who did not have ownership in a home for the past three years.
  • 5% down payment on home purchase on Conventional Loans.

Qualifying For Conventional Mortgages 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

If you have a mortgage part of your Chapter 7 bankruptcy, the waiting period is 4 years from your bankruptcy discharge date even though the deed of your home has not been transferred after the discharge date of your Chapter 7 bankruptcy.  This is a new Fannie Mae mortgage lending guideline.  Prior to this new regulation, homeowners who had a mortgage part of their 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 when the lender has transferred the deed out of the borrower’s name into the bank’s name and had it is reflected on public records.  Now, the waiting period clock starts from the discharge date of the Chapter 7 bankruptcy 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.

Gustan Cho NMLS 873293

Gustan Cho Associates

www.gustancho.com

Toll Free: 800-900-8569

Direct: 262-716-8151