This BLOG On Fannie Mae Guidelines On Conforming Loans After Housing Event Was UPDATED And PUBLISHED On November 3rd, 2020
Conventional Loans are called conforming loans because they need to conform to Fannie Mae and/or Freddie Mac Mortgage Guidelines.
- The Federal Housing Finance Agency (FHFA) is the federal regulatory agency that regulates Fannie Mae and Freddie Mac
- Conforming Loans are not government loans
- The reason lenders conform to Freddie Mac and Fannie Mae Guidelines is Fannie/Freddie will not purchase conventional loans that do not conform to their lending guidelines
- Fannie Mae is more popular than Freddie Mac
- Both mortgage giants have similar mortgage guidelines
- There are mandatory waiting period requirements after housing event to qualify for conventional loans
In this article, we will cover and discuss Fannie Mae Guidelines On Conforming Loans After Housing Event.
What Is A Housing Event?
A housing event is the following:
- Deed In Lieu Of Foreclosure
- Short Sale
Fannie Mae Guidelines Changes On Deed In Lieu And Short Sale
The 2 year waiting period after a short sale and deed in lieu of foreclosure with a 20% down payment to qualify for a conventional loan came to a halt effective midnight August 15, 2014.
- New Fannie Mae Guidelines will eliminate the 2-year waiting period after a short sale and deed in lieu of foreclosure
- New Fannie Mae Guidelines in qualifying for conventional loans after a deed in lieu and/or short sale is now 4 years
- Buyers used to be able to qualify for conventional loans 2 years after a short sale or deed in lieu as long as the home buyer had 20% down payment and re-established credit
- There is a 4 year waiting period after a short sale or deed in lieu of foreclosure to qualify for a conventional loan as long as the home buyer has a 5% down payment
There is a seven-year waiting period to qualify for conventional loans after a regular foreclosure.
4 Year Waiting Period After Short Sale And Deed In Lieu To Qualify For A Conventional Loan
Homebuyers who have the 5% down payment and had a short sale or deed in lieu of foreclosure can now qualify for conforming loans after meeting a four-year waiting period:
- Need re-established credit
- No late payments after housing event
- 620 credit scores
- Meet all other Conforming Guidelines
- Private Mortgage Insurance required on buyers who put less than 20% down payment
Private mortgage insurance can drop off if the homeowner reaches under 80% loan to value on conventional loans. FHA loans require FHA annual mortgage insurance premium for the life of a 30-year fixed-rate mortgage and cannot be canceled. This holds true no matter how low the loan to value is.
Good News On Fannie Mae Guidelines On Conforming Loans After Housing Event
The 4 year waiting period after a short sale or deed in lieu of foreclosure comes with good news:
- The housing event can happen after the discharged date
- For example, if a homeowner had a mortgage included in their Chapter 7 Bankruptcy, the waiting period for them to qualify for a conventional loan is four years from the discharged date
- This only holds true if they did not reaffirm the mortgage
- The finalization of the housing event does not matter
- Fannie Mae and Freddie Mac only go off the discharged date of the bankruptcy
- HUD Guidelines require the waiting period to start from the recorded date of the foreclosure, deed in lieu of foreclosure, or short sale and not the discharged date of the bankruptcy
- There is a three year waiting period after the finalization of the housing event to qualify for FHA loans
Borrowers who had a prior mortgage included in Chapter 7 Bankruptcy but had the housing event finalized at a later date may only qualify for a conventional loan.
Down Payment Requirement On Conventional Loans
Currently, the waiting period is 4 years after a short sale or deed in lieu of foreclosure for home buyers with only a 5% down payment:
- 3% down payment on a home purchase is available for first time homebuyer
- Fannie Mae and Freddie Mac define first-time homebuyers are homebuyers who had no ownership in a home in the past three years
- Private Mortgage Insurance (PMI) is required on conventional loans with higher than 80% LTV
If the property appreciates and the loan to value falls at and/or below 80% LTV, the PMI can drop off.
Fannie Mae And Freddie Mac Guidelines On Student Loans
Deferred student loans are not accepted on conventional loans. Income-Based Repayment (IBR) is allowed on conventional loans.
- This holds true even though the income-based repayment is a zero payment
- IBR payments need to report on the borrower’s credit report
- If IBR does not report on the credit report, the lender needs to do a credit supplement
Borrowers with a large student loan balance on an IBR payment plan may need to go with conventional versus FHA loans.
Fannie Mae Guidelines On Conforming Loans After Housing Event: Other Factors
Just waiting out the waiting period and having the 5% down payment is not the only qualification:
- Reestablished credit with timely payments is required
- Having a history of late payments, collections, charge offs, and judgments after the short sale and/or deed in lieu of foreclosure is normally a deal killer
- One or two late payments after bankruptcy and/or foreclosure is not always a deal killer
- It depends on the automated underwriting system findings
Gustan Cho Associates offers one day out of foreclosure and one day out of bankruptcy non-QM loan programs.
Non-QM Loans One Day Out Of Foreclosure And Bankruptcy With No Waiting Period Requirements
Gustan Cho Associates has non-QM home loan mortgage programs where there is no mandatory waiting period after a housing event and no waiting period after bankruptcy. In a booming housing market where home prices are skyrocketing, many home buyers can benefit with non-QM loans one day out of foreclosure and/or bankruptcy with a 30% down payment.
Home Buyers who need to qualify for conforming or government loans or non-QM loans with a national mortgage company licensed in multiple states can contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at email@example.com. We are available 7 days a week, evenings, weekends, and holidays.