FHA Lending Limit
Last year, the FHA lending limit was capped at $410,000 unless the property was located in a high cost area. Earlier in 2014, FHA lending limit got lowered to $271,000 in all counties in the United States unless the property is located in a high cost area where depending on the county, the FHA lending limit is higher than the $271,000. The lowering of FHA lending limit has limited many home buyers who are qualified to purchase a higher priced home to purchase a lesser priced home. For example, last year, if a home buyer who was qualified to purchase a home for $400,000 would have no problem to purchase that home with a 3.5% down payment. Unfortunately, now, the maximum loan amount that same home buyer will qualify for is a mortgage loan amount of $271,000. If the home buyer wants to purchase a higher priced home, he or she can do so, however, they need to come up with the cash difference between the actual purchase price and the maximum loan amount of $271,000.
Conventional Lending Limit
The conventional lending limit has not changed from $417,000. Conventional lending limit is still $417,000. Those home buyers who want to purchase a higher priced home and were seeking a FHA loan but are restricted to the new FHA lending limit of $271,000 will be forced to go through the conventional lending route. However, conventional mortgage lending guidelines are much stricter than FHA lending guidelines. For example, to qualify for a FHA home purchase loan with a 3.5% down payment, a home buyer only needs to have a 580 FICO credit score. For conventional loan programs, the minimum credit score required to qualify is 620 FICO credit score. The waiting period for a FHA loan after a bankruptcy is two years. Conventional loan programs require a minimum of a 4 year waiting period after a bankruptcy. Minimum waiting period after a foreclosure for a FHA loan is three years from the recorded date of a foreclosure. For conventional loan programs, there is a mandatory 7 year waiting period after a foreclosure. Maximum debt to income ratios to qualify for a FHA loan is 56.9% DTI. For conventional loan programs, the maximum debt to income ratios is capped at 45%. FHA loan programs allow for a non-occupant co-borrower to be added to the borrower for income qualifications. Conventional loan programs do not allow for non-occupant co-borrowers. 100% gift funds are allowed for FHA loan programs. Conventional loans only allow a portion of the down payment to be gifted. If a home buyer is restricted due to the above restrictions on conventional loan lending guidelines, then FHA loan programs may be the only route to go.
2 Year Waiting Period After Deed In Lieu Or Short Sale: Conventional Loan
For those who have had a deed in lieu of foreclosure or short sale, they can qualify for a conventional loan if they have at least a 20% down payment on their home purchase after a two year waiting period. This route may be a great alternative for home buyers who had a deed in lieu of foreclosure or short sale and want to purchase a higher priced home and need to get a loan that is higher than the FHA lending limit. The biggest issue is that the home buyer needs a 20% down payment.
2015 Update On Conventional Loan After Deed In Lieu And Short Sale
The two year waiting period after deed in lieu of foreclosure and short sale for conventional loan with 20% down payment is no longer in effect. Fannie Mae has discontinued the two year waiting period after deed in lieu of foreclosure and short sale to qualify for a conventional loan with 20% down payment on August 2014. New Fannie Mae mortgage lending guidelines to qualify for a conventional loan after deed in lieu of foreclosure and short sale is now four year with 5% down payment and re-established credit.
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