In this blog, we will cover and discuss the hundreds of home purchase loans available today. We will cover traditional and non-prime home purchase loans and guidelines homebuyers and real estate investors should be aware of that are available today. Besides the traditional government-backed and conventional loans, Gustan Cho Associates has hundreds of non-QM and non-prime mortgage loans for owner-occupant primary homes, second homes, and investment properties. We also have lending outlets for commercial loans, bridge loans, and hard money loans. Gustan Cho Associates is licensed in 48 states and has lending partnerships with over 170 wholesale mortgage lenders. We have every mortgage loan program in today’s mortgage marketplace for owner-occupant, second homes, and investment homes. We will detail the most popular mortgage loan programs in this guide with useful internal links to detailed articles if you need further detailed content. Over 75% of our clients are borrowers who could not qualify at other lenders due to a last-minute loan denial, stress during the mortgage process, lender overlays, or the lender not having the mortgage loan programs the borrower needed. Gustan Cho Associates is known as a one-stop mortgage shop due to the hundreds of traditional and non-QM mortgage loan programs we have available for homebuyers, sellers, and real estate investors.
Traditional and Non-Prime Mortgage Loan Programs
How do you choose the right home loan from all the mortgage loan programs and guidelines available?
- Consider your credit score and down payment.
- Determine the type and use of your property.
- Establish your time frame.
A good lender can help you sort through the loans that won’t work for you and find those that will.
Mortgage Loan Programs and Guidelines For Homebuyers With Credit Challenges
If you have issues with bad credit history or low credit scores, some programs are more forgiving than others. You can apply for a conforming (Fannie Mae or Freddie Mac) loan if your application is very strong and your credit scores are at least 620. Don’t expect to get loan approval with a low credit score, high debt-to-income ratio and a tiny down payment through a conforming program. But if you’re putting at least 20% down and have a DTI under 40%, you have a shot.
Understanding the Automated Underwriting System
Lenders underwrite these loans with automated underwriting systems (AUS) so it only takes a few minutes to see if you qualify. If you need more flexibility than a conforming program offers, look at government-backed home loans. Minimum down payments range from 0% to 10%. These products are only available for owner-occupant primary homes. If you want to buy a vacation home or a rental, you’ll need to look at Non-QM loans. Non-QM loans include loans for people with unusual circumstances and people with credit problems. Some allow you to buy a home one day out of bankruptcy or foreclosure, for example. Lenders sometimes call these loans “non-prime.”
FHA Loans For Bad Credit
Are FHA loans right for me? FHA mortgages are extremely popular and are used by a majority of the buyers we serve. FHA loans are the best loan program for borrowers with less than perfect credit and lower credit scores. The FHA loan is not for investors or vacation home buyers. Buyers can finance a one- to four-unit owner-occupied primary residence property with an FHA loan, Guidelines allow credit scores as low as 580 with a 3.5% down payment.
FHA Loans With Credit Scores Down to 500 FICO
With 10% down, borrowers with scores between 500 and 579 can apply for FHA financing. Outstanding unpaid collections are permitted. However, if outstanding non-medical collection balances total more than $2,000, it must be considered as part of the debt to income ratio. Non-medical collection accounts are exempt from the calculation of debt to income ratios. Charge-offs and medical collections are also exempt. FHA allows a maximum debt-to-income (DTI) ratio of 56.9% with a credit score of 620 or higher. The maximum DTI is 43% with credit scores of under 620 to get an approve/eligible per automated underwriting system (AUS).
FHA Loans After Bankruptcy
Borrowers can qualify for FHA loans after Chapter 7 Bankruptcy. There is a 2-year waiting period after the Chapter 7 Bankruptcy discharge date to qualify for an FHA loan. Borrowers can qualify for FHA Loan one year into the Chapter 13 Bankruptcy repayment plan. Requires the approval of the Chapter 13 Bankruptcy Trustee. No waiting period after the Chapter 13 Bankruptcy Discharged date. Needs to be manual underwriting if the discharged date of the Chapter 13 Bankruptcy has not been seasoned for at least 2 years.
FHA Loans During Chapter 13 Bankruptcy
Gustan Cho Associates is one of the few lenders with no lender overlays on FHA loans. No waiting period after Chapter 13 Bankruptcy discharged date. However, it needs to be a manual underwrite due to not being seasoned two years after a Chapter 13 Bankruptcy discharge date.
Mortgage Approval With Late Payments After Bankruptcy
Derogatory credit post-bankruptcy is considered very serious. Most lenders will not qualify and approve borrowers with late payments after bankruptcy. Gustan Cho Associates will approve borrowers with late payments after bankruptcies if they get approve/eligible per AUS Findings. There are a few lenders that will accept a few late payments after bankruptcy. But need approve/eligible per DU FINDINGS. If findings render Refer/Eligible due to late payments after bankruptcy, the file can be downgraded to manual underwriting but compensating factors are required.
HUD Waiting Period on FHA Loans After Foreclosure
Borrowers can qualify for FHA Loans after foreclosure, deed in lieu of foreclosure, and short sale after a three-year waiting period. The waiting period starts from the recorded date of foreclosure and/or deed in lieu of foreclosure reflected on public records or the date of sheriff’s sale. The three-year waiting period after the date of short sale reflected on HUD Settlement Statement/Closing Disclosure. HUD allows 100% gifted funds to be used for a down payment.
HUD Does Not View Gift Funds Favorably
HUD does not view gift funds favorably and may require that gift funds are not allowed on lower credit profile borrowers The Automated Underwriting System will dictate whether gift funds are not eligible for higher-risk borrowers. One-time upfront mortgage insurance premium of 1.75% of the loan amount. Requires a lifetime annual FHA mortgage insurance premium of 0.085% for 30-year fixed-rate FHA Loans. FHA appraisal is required.
HUD Property Guidelines on FHA Loans
The house must meet FHA guidelines for safety/condition and need to appraise. Conditions placed on FHA mortgages are more relaxed than some of the other popular programs. Many people with lower credit scores use this program. This is because the credit score requirements are lower, and debt to income ratio requirements are more relaxed than in other mortgage loan programs. HUD allows a maximum of 46.9% front end and 56.9% back end to get an approve/eligible per automated underwriting system. It is easier to get an approve/eligible per automated underwriting system on FHA loans than in any other government and/or conventional loan program.
HUD Guidelines on Manual Underwriting Guidelines During Chapter 13 Bankruptcy
Borrowers can be eligible for an FHA loan one year into the Chapter 13 Bankruptcy repayment plan with Trustee Approval. No late payments during Chapter 13 Bankruptcy repayment plan. Chapter 13 Bankruptcy does not have to be discharged to qualify for an FHA loan. Chapter 13 Bankruptcy does not have to be discharged. All Chapter 13 Bankruptcy repayment plan borrowers are manual underwrites. Manual underwriting is no different than an automated underwriting system approval with the exception of caps on debt to income ratio. There is no waiting period after the Chapter 13 Bankruptcy discharge date. The three-year waiting period after a deed in lieu of foreclosure, short sale, and foreclosure.
Conventional loans are the second most popular loan program in the nation. This holds especially true when borrowers have mortgage part of their Chapter 7 Bankruptcy where the four-year period starts from the discharged date of the Chapter 7 Bankruptcy and not the recorded date of the foreclosure. Mortgage Loan Programs And Guidelines On Conventional Loans have more stringent debt to income ratios and credit score requirements than the FHA mortgage loan programs.
Conforming Mortgage Guidelines
Borrowers can qualify for a one to four-unit owner-occupied property, second home, or investment home with conventional loans. Credit scores as low as 620. Both the maximum DTI for Fannie Mae and Freddie Mac is 50%. And 97% of loans permit down payments as low as 3%. Unpaid collection accounts and charged-off accounts are fine. They do not have to be satisfied with owner-occupant primary home conventional loans.
Mortgage Loan Programs and Guidelines on Conventional Loans
Borrowers can qualify after a four-year waiting period for Chapter 7 bankruptcy. There is a two-year waiting period after the Chapter 13 Bankruptcy discharged date. Prior foreclosure is permitted after a 7-year waiting period. Borrowers with a prior short sale or deed in lieu permitted have a 4-year waiting period. Permits second home financing and investment home financing.
Mortgage Loan Programs and Guidelines on Private Mortgage Insurance
Borrowers must purchase private mortgage insurance (PMI) with less than 20% down. If you have a mortgage part of Chapter 7 Bankruptcy, you can qualify for a conforming loan four years from the discharged date of the Chapter 7 Bankruptcy. Both Fannie Mae and Freddie Mac allow up to 3% seller concessions on owner-occupant primary properties. The same 3% seller’s concession applies to second homes by sellers to contribute to home buyers for closing costs. 2% sellers concessions for investment properties.
Mortgage Loan Programs and Guidelines on VA Loans
Gustan Cho Associates has one of the most aggressive VA loan programs nationally. The United States Department Of Veteran Affairs administers the VA Loan Program for its veterans. Veterans with a certificate of eligibility can qualify for a VA Loan. VA Loans is hands down the best mortgage loan program. 100% financing. No monthly mortgage insurance premium. VA Loans also offers the lowest mortgage rates out of all mortgage loan programs. You can get a 100% Loan To Value Cash Out VA Loan Refinance with a VA Loan.
VA Multi-Family Home Purchase Loans
Veteran homebuyers can purchase a one to four-unit primary owner occupant property with a VA loan You cannot purchase a second home or investment property with a VA loan. No Overlays On VA loans. 21-DAY CLOSINGS. No money down on a home purchase. 100%LTV cash-out refinances are allowed on VA loans. The funding fee rolled into the balance of the VA loan.
Mortgage Loan Programs and Guidelines on Mortgage Insurance on VA Loans
No annual mortgage insurance premium. Only limited to veterans with a Certificate Of Eligibility. Has one of the lowest mortgage interest rates out of all mortgage loan programs. There is no minimum credit score requirement on VA loans. There is no maximum debt to income ratio caps on VA loans as long as the borrower can get an approve/eligible per automated underwriting system (AUS). Debt to income ratio with VA Loans can be as high as 70% DTI or higher at Gustan Cho Associates with an AUS Approval.
USDA Rural Development is a popular program in rural areas. It benefits those with lower income. Lenders offer 100% financing with no down payment required.
Here are some of the program highlights for USDA Rural Development Mortgage Loans:
Borrowers can qualify for an owner-occupied primary one to a four-unit property with a USDA Loan. Second homes and investment properties are not eligible for USDA Loans. FICO credit scores are as low as 580. USDA Loans do not require a down payment and offer 100% financing. The maximum debt to income ratio is 29% front-end and 41% back-end. Income limitations apply. No more than one 30-day late payment is permitted within the prior 12-month period for borrowers who have had mortgages. Open collection accounts not permitted. The three-year waiting period after Chapter 7 bankruptcy. House must qualify for Rural Development as the area is defined by USDA. Gustan Cho Associates has no lender overlays on USDA loans.
Mortgage Loan Programs and Guidelines & Comparisons
As you can see, there are some similarities but differences in each program. FHA mortgages by far have the most relaxed credit requirements and debt-to-income requirements. After the recession, many borrowers have experienced a negative credit impact which rules out a conventional or USDA loan option. 80% of real estate transactions are FHA loans. These loans are one of the most popular programs.
Mortgage Loan Programs and Guidelines on Credit Requirements
When you decide to apply for a loan, your loan officer will review your credit profile, debt to income ratios, and available down payment. The down payment and income calculations are part of the qualification and pre-approval process. The loan officer will advise you as to which programs are available to you. Your mortgage loan originator should be willing to discuss the specific differences in the programs you qualify for in order for you to make the best decision possible. What borrowers do not want to do is to enter into any mortgage program that they do not understand as this is likely the largest investment they are making,
Mortgage Loan Programs and Guidelines on NON-QM Loans
Here are other highlights of loan programs:
Majority of all loans close in 21 days or less.
- 75% of the borrowers of Gustan Cho Associates are folks who have gotten a last-minute mortgage loan denial or are stressing over their loan process with their initial lender where their closing is getting delayed.
- The reason for the above is due to the fact the loan officer did not properly qualify the borrower and the fact that the lender has overlays
- No overlays on government and conventional loans
- Gustan Cho Associates offers NON-QM Loans
- Non-QM Loans are out of the box loan programs such as bank statement mortgage loans, no waiting period after bankruptcy and/or foreclosure, and investment property loans with no income verification
- Reverse Mortgages
- FHA 203k Loans
To qualify for a mortgage, please contact us at Gustan Cho Associates at 800-900-8569. Or text us for a faster response. You can also email us at email@example.com. The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.
Home Purchase Mortgage Programs Listed By Each Individual State:
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