Preparing To Qualify For Conventional Loans Versus FHA Mortgage

This ARTICLE On Preparing To Qualify For Conventional Loans Versus FHA Mortgage

Preparing To Qualify For Conventional Loans is often required for some mortgage borrowers who cannot go with an FHA loan.

• Every home mortgage program has its own agency mortgage lending guidelines
• There are instances where borrowers cannot go with an FHA loan
• Two examples are when a borrower has a prior mortgage included in their bankruptcy
• Fannie Mae and Freddie Mac have different waiting period guidelines on conventional loans versus HUD on FHA mortgages when it comes to a mortgage or mortgages included in bankruptcy
• We will discuss this topic in this article
• A second reason why borrowers need to go with conventional versus FHA loans is if the borrower has very high student loan balances
• HUD does not accept Income-Based Repayment (IBR) on student loans in debt to income ratio calculations
• However, Fannie Mae and Freddie Mac does allow Income-Based Repayment on conventional loans

In this article, we will discuss and cover Preparing To Qualify For Conventional Loans Versus FHA Mortgage.

Preparing To Qualify For Conventional Loans Versus FHA Due To Prior Mortgage Included In Bankruptcy

There are instances where many consumers will include a mortgage in their bankruptcy.

• They may no longer be able to afford the home and the home may not have any equity
• Therefore, they want to forfeit the home and include the mortgage in bankruptcy
• Fannie Mae and Freddie Mac have different waiting period requirements after bankruptcy and foreclosure than HUD
• Fannie Mae and Freddie Mac start the four-year waiting period requirement to qualify for a conventional loan from the discharged date of the Chapter 7 Bankruptcy
• The foreclosure, deed in lieu of foreclosure, a short sale can happen after the discharged date of the bankruptcy and does not matter when it comes to qualifying for a conventional loan
• The borrower cannot have reaffirmed the mortgage after bankruptcy
• With HUD, there is a three year waiting period after the finalization of foreclosure, deed in lieu of foreclosure, short sale, if the borrower had a mortgage, included in bankruptcy
• The discharged date of bankruptcy does not matter
• There are instances where it may take years after bankruptcy to get the housing event finalized
• In cases like these, borrowers may need to start preparing to qualify for conventional loans versus FHA loans

Gustan Cho Associates are experts in helping borrowers preparing for conventional loans versus other loan programs due to having a prior mortgage included in bankruptcy.

Non-Occupant Co-Borrower Guidelines On FHA Versus Conventional Loans

Fannie Mae and Freddie Mac allow non-occupant co-borrowers to be added on conventional loans.

• HUD, the parent of FHA, also allow non-occupant co-borrowers to be added to the main borrowers on FHA loans
• To qualify for a 3.5% down payment home purchase FHA loan with non-occupant co-borrowers, the non-occupant co-borrowers need to be related to the main borrower by law, marriage, and/or blood
• HUD will allow non-occupant co-borrowers that is not related to the main borrower by law, marriage, blood to become non-occupant co-borrowers
• However, the main borrower would need to put a 15% versus a 3.5% down payment to qualify

In the event, if the non-occupant co-borrowers are not related to the main borrower by law, blood, marriage, then the borrower needs to qualify for a conventional versus FHA loan.

Preparing To Qualify For Conventional Loans For Borrowers With High Student Loan Debts

Many professionals, especially with professional and/or graduate degrees, have high student loan debts.

• Student loans remain to be one of the largest barriers when qualifying for a home mortgage
• Many professionals such as dentists, doctors, lawyers, teachers, and government workers have student loan debt balances of over $100,000
• Many government workers such as government doctors, lawyers, and consultants have lower salaries but very high student loan balances
• With HUD, lenders can no longer exempt student loans from FHA loan debt to income ratio calculations that have been deferred for longer than 12 months
• HUD does not accept IBR Payments on student loans
• HUD requires lenders to take 1.0% of the outstanding student loan balance and use that figure as a hypothetical monthly debt
• There are certain lenders like Gustan Cho Associates that will allow a hypothetical monthly payment that has been amortized over an extended term
• This figure needs to be in writing by the student loan provider
• This figure can be used in lieu of 1.0% of the student loan balance
• This number normally turns out to be 0.50% to 0.60% of the student loan balance
• The good news is Fannie Mae and Freddie Mac do accept Income-Based Repayment (IBR Payments)

Borrowers who have large student loan balances on an IBR payment may need to qualify for conventional versus FHA loans.

Qualifying For A Mortgage With A Lender With No Lender Overlays

The team at Gustan Cho Associates are experts in helping homebuyers qualify for a mortgage with no lender overlays on government and conventional loans. Over 75% of our borrowers at Gustan Cho Associates are folks who could not qualify at other lenders due to their lender overlays. Gustan Cho Associates, licensed in multiple states, has no lender overlays on government and conventional loans. To qualify for a mortgage with a five-star lender licensed in multiple states with no lender overlays, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.