When it comes to getting a new conventional loan vs a FHA loan, if you recently had a foreclosure you may have to wait seven years to get a new conventional loan, but still only three years to get FHA loan.
Recently Fannie Mae (who controls most of the lending guidelines for conventional loans) came out with a new guideline where borrowers will have to wait seven years after the date of a foreclosure sale in order to get a new conventional loan. This time period can be cut to five years if you can document an extenuating circumstance that was the reason for the foreclosure. This change has been made by Fannie Mae due to the number of “strategic defaults” where borrowers who can pay choose to walk away. This also encourages the pursuit of short sales for borrowers who are underwater and can’t sell. Fannie Mae only requires a two year wait after a short sale to obtain a new conventional mortgage.
FHA still remains only a three year wait after the date of a foreclosure sale to obtain a new FHA loan. VA loans are the most lenient with only two years after foreclosure needed to get a VA loan.
This new rule is especially impactful on investors wanting to get non-occupied investor loans. FHA and VA loans are only for owner occupants. So the ONLY option for investors to get a mortgage is conventional financing. And investors are now out of the market for seven years following a foreclosure on their record.
Here are some of the most up-t0 date benefits of conventional and FHA loans:
- FHA loan interest rates are REDICULOUSLY low right now! The lowest I have EVER seen in the business! Ask me about a refinance!
- FHA loan down payment is only 3.5% and that can be a gift from a relative, this is lowest down payment available of any loan today (outside of specialized loans such as VA loans for military and USDA loans for rural properties)
- Qualify FHA loan with very lenient guidelines…only 620 FHA loan credit needed and 56.9% debt-to-income ratio (conventional needs a 680 credit score and 45% debt ratio)
- Maximum FHA loan up to $729,750 in many California areas such as Los Angeles, San Diego, San Jose, San Francisco, Santa Barbara and other areas. This would allow you to buy a house with FHA loan California up to $756,217 with only 3.5% down
- 5% down available if you have a 720 credit score with 41% debt-to-income ratio
- Conventional loan limits in California up to $729,750
- Homepath mortgage available on Homepath properties with 3% down and 10% down for 2nd home buyers and investors
- Homepath financing available on Fannie Mae owner condos without any condo checks
For more FHA, conventional or Homepath loan information in California feel free to send me an email at firstname.lastname@example.org or call at 858-922-7899.
Sr. Loan Officer (FHA, VA and conventional loan specialist)