Conventional Mortgages

Fact: Conventional loans allow as low as 3% down payment

Fannie Mae provides the underwriting guidelines for most conventional mortgages through it’s automated underwriting engine called Desktop Underwriter, or DU.

Freddie Mac offers conventional mortgages with mostly similar guidelines to Fannie Mae except for slight differences.  Some of the advantages of using Freddie Mac conventional financing is the ability to use co-mortgagers to qualify (similar to FHA), and the option to use 1 year income verification in some cases.

Borrower Requirements

  • Owner Occupied and Investment Property loan allowed
  • Minimum 620 Credit Score
  • Income verification required – W2 only available
  • Tax returns required for all self employed – All schedules
  • As low as 3% down payment for First Time Homebuyers
  • 5% minimum down payment for loans up to $417,000
  • 10% minimum down payment for loans as high as $625,500
  • Approved buyer assistance can be used up to 100% combined loan to value
  • 45% Debt to Income (DTI) ratio / 50% DTI allowed with compensating factors

Loan Terms

  • 30 Year Fixed
  • 20 Year Fixed
  • 15 Year Fixed
  • 10 Year Fixed
  • 5/1 | 7/1 | 10/1 ARM – Adjustable Rate Mortgage*
  • Private Mortgage Insurance required for loans above 80% loan to value
  • Lender paid mortgage insurance available – PMI alternative

*Interest only payments available as of 2015

Property Requirements

Properties eligible for Conventional financing include:

  • 1 family residence – single family residence (SFR)
  • 2 family residence – duplex (owner must occupy one unit)
  • 3 family residence – triplex (owner must occupy one unit)
  • 4 family residence – fourplex (owner must occupy one unit)
  • Single family Condominium – with HOA approval
  • Single family Townhouse – with HOA approval

Loan Limits

Conventional loans offer Standard Balance and High Balance financing options.  These loan limits are standard across the board regardless of State or County.

  • California: 1 unit: $417,000 2 unit: $533,850 3 unit: $645,300 4 unit: $801,950
  • California: 1 unit: $625,500 2 unit: $800,775 3 unit: $967,950 4 unit: $1,202,925

Maximum High Balance Loan Amounts differ by county, but may never exceed these amounts.

Waiting Periods after Credit Hardship

  • 4 Years from Discharge of Chapter 7 Bankruptcy
  • 2 Years from Discharge of Chapter 13 Bankruptcy
  • 7 Years from Foreclosure*
  • 4 Years from Short Sale or Deed in Lieu of Foreclosure*

* If mortgage debt is discharged in a Bankruptcy, and a foreclosure, short sale, or deed in lieu of foreclosure occurs AFTER the discharge, lenders may use BK discharge waiting periods and disregard waiting period from removal of liens.

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