Fannie Mae Guidelines On Conforming Loans After Housing Event

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Fannie Mae Guidelines On Conforming Loans After Housing Event

This BLOG On Fannie Mae Guidelines On Conforming Loans After Housing Event Was UPDATED On April 17th, 2018

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.

A housing event is the following:

  • Foreclosure
  • 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 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

4 Year Waiting Period After Short Sale And Deed In Lieu To Qualify For A Conventional Loan

Home buyers 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

Good News With New Fannie Mae Guidelines

The 4 year waiting period after a short sale or deed in lieu of foreclosure comes with good news. Those who had a mortgage as part of Chapter 7 Bankruptcy, the waiting period is four years from the discharged date of the Chapter 7 Bankruptcy discharged date. The housing event can happen after the discharged date. For example, if a homeowner had a mortgage part of Chapter 7 Bankruptcy and the discharged date was four years ago but the foreclosure want not finalized until recently, that person can qualify for conventional loan.

  • 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 home purchase is available for home buyers who had no ownership in a home in past three years
  • There is a seven year waiting period to qualify for conventional loans after a regular foreclosure
  • Income Based Repayment (IBR) is allowed on conventional loans
  • IBR payments needs to report on credit report
  • If IBR does not report on credit report, then lender needs to do a credit supplement

Other Factors

Just waiting out the waiting period and having the 5% down payment is not the only qualification.

  • Fannie Mae also want to see borrowers with no late payment history since the short sale and/or deed in lieu of foreclosure and re-established credit
  • Having a history of late payments, collections, charge offs, and judgments after the short sale and/or deed in lieu of foreclosure is not a deal killer
  • It depends on the automated underwriting system findings

Home Buyers who need to qualify for conforming or government loans with a direct lender with no mortgage overlays can contact us at The Gustan Cho Team at 262-716-8151 or text us for faster response. We are available 7 days a week, evenings, weekends, and holidays.

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