Mortgage Loan Programs And Guidelines For Home Buyers
This Blog On Mortgage Loan Programs And Guidelines For Home Buyers Was UPDATED On September 6th, 2018
Which Mortgage Loan Programs Is Right For Me?
When buying a home many people are not aware of all of the different mortgage programs and mortgage loan guidelines requirements to qualify and available to them.
- The Gustan Cho Team at Gustan Cho Associates has a national reputation of being able to originate and close loans that other lenders cannot because we have no overlays on government and conventional loans
- Many do not know the different types of limitations with an individual program and why the program you may want may or may not work for your situation
- The first question home buyers ask themselves is What Mortgage Program Is Right For Me and what are the updated mortgage loan programs and guidelines
- Let’s explore the top three mortgage loan programs I am asked about by mortgage borrowers in the areas I service
Mortgage Loan Programs And Guidelines On FHA Loans
What Mortgage Program Is Right For Me? FHA Mortgages?
FHA mortgages are extremely popular and are used by a majority of the buyers we serve. FHA Loans has more relaxed credit requirements than the other popular mortgage programs.
Here are some highlights of FHA mortgage loan programs:
- FHA Loans is for primary owner occupant properties only and not for second homes nor investment homes.
- Home Buyers can buy a one to four unit owner occupied primary residence property with a FHA Loan
- Credit scores as low as 580 are permitted for 3.5% down payment home purchase loan
- Under 580 scores FHA requires borrowers to put 10% down payment on home purchase
- Outstanding Unpaid collections are permitted
- However, if outstanding non-medical collection balances total more than $2,000, it must be considered as part of debt to income ratio at 5% of the balance or an agreed upon payment arrangement
- Non-Medical collection accounts are exempt from adding the 5% of outstanding collection balance in the calculation of debt to income ratios
- Charge Off Accounts and Medical Collections are exempt from taking the 5% portion of outstanding balance to be used as part of debt to income ratio calculations
- FHA Allows Maximum Front End DTI of 46.9% and Back End Debt To Income Ratios of 56.9% with a FICO of 620 or higher
- Maximum DTI is 43% with credit scores of under 620
Qualifying For FHA Loans After Bankruptcy
- Borrowers can qualify for FHA Loans after Chapter 7 Bankruptcy
- There is a 2 year waiting period after Chapter 7 Bankruptcy discharged date to qualify for a FHA insured mortgage loan.
- Borrowers can qualify for FHA Loan one year into Chapter 13 Bankruptcy repayment plan with the approval of the Chapter 13 Bankruptcy Trustee.
- No waiting period after Chapter 13 Bankruptcy Discharged date but need to be manual underwriting if the discharged date of the Chapter 13 Bankruptcy has not been seasoned for at least 2 years.
- The Gustan Cho Team at Gustan Cho Associates are one of a few national mortgage banking firms that has no overlays on qualifying for 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 discharged date
- Derogatory credit post-bankruptcy is considered very serious and 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 an 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 required
Waiting Period After Housing Event To Qualify For Mortgage
- Borrowers can qualify for FHA Loans after foreclosure, deed in lieu of foreclosure, short sale after three year waiting period
- Waiting period starts from the recorded date of foreclosure and/or deed in lieu of foreclosure reflected on public records or date of sheriff’s sale.
- Three year waiting period after date of short sale reflected on HUD Settlement Statement/Closing Disclosure.
- FHA allows 100% gifted funds to be used for down payment.
- However, FHA 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 is not eligible to higher risk borrowers
- FHA requires a one time upfront mortgage insurance premium of 1.75% of the loan amount
- FHA requires lifetime annual FHA mortgage insurance premium of 0.085% for 30 year fixed rate FHA Loans
- FHA appraisal is required and the house must meet FHA guidelines for safety/condition and need to appraise out
- Conditions placed on FHA mortgages are more relaxed than some of the other popular programs
- Many people with lower credit scores use this program because the credit score requirements are lower, debt to income ratio requirements are more relaxed by letting borrowers cap their DTI caps up to 56.9%, and prior credit blemishes are permitted.
Mortgage Loan Programs And Guidelines On Conventional Loans
Conventional mortgage is another common mortgage program that is used quite often, especially 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 has more stringent debt to income ratios and credit score requirements than the FHA mortgage loan programs.
Here are Mortgage Loan Programs And Guidelines On Conventional Loans:
- 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.
- Maximum DTI of 45% for Fannie Mae
- Maximum DTI of 50% for Freddie Mac
- Down payments as low as 3% permitted for first time home buyers
- Unpaid collection accounts and charge off’s must be paid prior to closing
- Prior bankruptcy is permitted after a four year waiting period for Chapter 7, two years for Chapter 13
- Prior foreclosure permitted after a 7 year waiting period
- Prior short sale or deed in lieu permitted after a 4 year waiting period
- Permits second home financing and investment home financing
- Private Mortgage Insurance required for under 20% down
- Traditional appraisal is required
- If you have mortgage part of Chapter 7 Bankruptcy, borrowers can qualify for a Conventional Loan four years from the discharged date of the Chapter 7 Bankruptcy
- However, the foreclosure and/or sheriff’s sale needs to have been finalized
- Both Fannie Mae and Freddie Mac allows up to a 3% sellers concessions on owner occupant primary properties and second homes by sellers to contribute to home buyers for closing costs and 2% sellers concessions for investment properties
- The Gustan Cho Team does not have any overlays on Conventional Loans
Mortgage Loan Programs And Guidelines On VA Loans
Gustan Cho Associates has one of the most aggressive VA Loan Programs nationally and has no overlays on VA Loans. 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 out there where there is no down payment required and 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.
Here are some of the high lights of a VA Loan.
- Veteran home buyers 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 and 100% LTV cash out refinance allowed.
- Funding Fee can be rolled into VA Loan.
- No annual mortgage insurance premium.
- Only limited to veterans with Certificate Of Eligibility.
- Has one of the lowest mortgage interest rates out of all mortgage loan programs.
- Minimum credit score required is 580
- Debt to income ratio with VA Loans can be as high as 62% DTI with The Gustan Cho Team at Loan Cabin Inc.
Mortgage Loan Programs And Guidelines On USDA Mortgages
USDA Rural Development is a popular program in rural areas and for those with lower income where there is no down payment required.
Here are some of the program high lights for USDA Rural Development Mortgage Loans:
- Borrowers can qualify for a owner occupied primary one to four unit property with a USDA Loan.
- Second homes and investment properties are not eligible with USDA Loans.
- FICO credit scores as low as 580
- USDA Loans do not require a down payment and offers 100% financing
- Maximum debt to income ratio is 41%
- Income limitations apply
- No more than one 30-day late payment permitted within the prior 12-month period for borrowers who have had mortgages
- Open collection accounts not permitted
- Three year waiting period after Chapter 7 bankruptcy and 1 year for Chapter 13 Bankruptcy
- Foreclosure permitted after a 3 year waiting period is satisfied
- House must qualify for Rural Development as the area is defined by USDA
- The Gustan Cho Team does not have 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
- Speaking with different realtors, FHA mortgage programs are being used in more than 80% of the real estate transactions in several different areas, making it one of the most popular programs
- When you decide to apply for a loan, your loan officer will review your credit profile, debt to income ratios, available down payment and the source of that down payment, income calculations to determine income amounts to be used and then advise you as to which programs are available to you
- Loan officer 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 the likely the largest investment they are making
Other Mortgage Loan Programs And NON-QM Loans
Here are other high lights of loan programs:
- Majority of all loans close in 21 days
- 75% of the borrowers of The Gustan Cho Team at Loan Cabin Inc. are folks who 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 due to the fact that the lender has overlays
- No overlays on government and conventional loans
- 100% of our pre-approvals get closed
- Gustan Cho Associates offers NON-QM Loans which 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
Contact us at 262-878-1965 or text Gustan Cho on his cell at 262-716-8151 if you are going through a stressful mortgage process or have been told you do not qualify for a home loan. Borrowers can also email us at firstname.lastname@example.org.