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Home Loan Programs

Traditional Financing
Portfolio Loans
Student Loan Guidelines
Waiting Periods
Traditional Financing

Traditional Financing Home Loans

Traditional financing includes Government insured and Guaranteed loans, as well as Fannie Mae and Freddie Mac Conventional loans.

These loans are widely available and easy to access.  The greatest benefit of traditional financing is that there is one set of underwriting guidelines, which all lenders can follow.

Non traditional, Portfolio Loans do not have a consistent set of qualifying guidelines, and are a great option if you are unable to qualify for traditional financing.

Conventional - Fannie Mae & Freddie Mac

Fannie Mae and Freddie Mac have widely accepted underwriting guidelines that most lenders accept.  The overwhelming majority of loans are underwritten using Fannie Mae's Desktop Underwriter (DU) automated underwriting system (AUS).  Freddie Mac's AUS is knows as LPA, or Loan Product Advisor.

Freddie Mac is less used, and is often missed as a better opportunity than a Fannie Mae conventional loan.  There is no difference between cost or rate with Fannie Mae and Freddie Mac, but the do have distinct differences in their underwriting guidelines.

HomeReady is Fannie Mae's affordable housing loan program.  This loan program offers a low down payment and reduced mortgage insurance and closing costs.  Eligibility is determined by income limits, or low to moderate income census tract status.

Home Possible is Freddie Mac's affordable housing loan program.  This loan program also offers a low down payment and reduced mortgage insurance and closing costs.  Eligibility is determined by income limits, or low to moderate income census tract status.

After over 20 years experience in the business, our experience is that Freddie Mac's Home Possible will have no income limits in areas that Fannie Mae enforces an income limit.  This happens often enough that I can confidently encourage you to try both options.

Conventional Qualifying Deep Links

FHA Government Insured Mortgage

FHA is often thought of as a first time buyer loan.  While it's true that many first time buyers use a FHA loan because of it's flexibilities and it's forgiving guidelines.

One of the most common advantages of using a FHA mortgage is the expanded Debt to Income Ratios.  This is one of most common reasons for using a FHA mortgage.

Mortgage insurance is required, and permanent with a FHA mortgage. This is sometimes mentioned as a negative feature of a FHA loan, but I assure you that it should not be. 

FHA mortgage insurance is very competitive, and often below market with a down payment as low as 3.5%.  Most homeowners will sell or refinance within the next 7-10 years.  You can also refinance as soon as you have 20% equity and remove the mortgage insurance.

FHA Qualifying Deep Links

VA Veteran Home Loans

VA Veteran loans are hands down the best home loan option on the market.  Reserved for eligible service members of our armed forces, this home loan offers 100% financing, and refinancing, even if you're taking cash out.

VA Veteran loans are often turned down by lenders that do not offer the full flexibility of manual underwriting, or the loan officer does not have the experience, or expertise to take the fight to the finish line, which the Veteran's Administration will let you do.

VA Qualifying Deep Links

USDA Rural Development Loans

USDA loans are available in rural areas of California.  The USDA loan offers 100% financing in approved Census Tracts.

The Top 3 Reasons Why USDA Home Loans are Amazing

  • No Down Payment (100% loan)
  • Low Monthly Mortgage Insurance
  • Can finance closing costs (up to 104%)

USDA Qualifying Deep Links

  • Qualifying for a USDA Rural Development Loan
Portfolio Loans

Common Uses for Portfolio Loans

Portfolio lending describes a wide range of unconventional scenarios that investors will offer.  Portfolio loan underwriting guidelines are not uniform in nature, and will vary from one investor to the next. 

Common reasons for using a portfolio loan include:

  • Buying a home after bankruptcy, short sale or foreclosure
  • Self employed borrowers
  • Foreign nationals
  • Cashflow qualifying investment loans
  • Second mortgages
  • High net worth, low documentable income
  • Fixing and flipping
  • Anything that falls outside of conventional guidelines

No Waiting Periods

Recent bankruptcy, foreclosure, short sale, or deed in lieu of foreclosure, are common motivations for moving forward with a portfolio loan.  The math almost always  works in the favor of it making sense to use this as a perfect bridge loan to get you from here, to a better loan in the short term future.

Portfolio loans will typically allow up to a 50% debt to income ratio, which is even more generous than FHA for those buyers that do not have a lot of credit card debt.

You're in the right place.  We have specialized in buying a home after hardship since 2011.  We have seen hundreds of different scenarios and situations, and have underwriters that are comfortable with these guidelines.

Bank Statement Loans

Bank Statement loans are one of the only financing options available to self employed borrowers.  Bank deposits are calculated in lieu of W2 income.

These loans often require a larger down payment, or equity in the home, and the interest rates are often higher than traditional financing.  Bottom line is that these are great options for self employed borrowers that move a lot of money through your business or personal bank account.

Jumbo Financing

A Jumbo home loan is any home loan that is more than the conventional conforming loan limits for the County that you’re buying in. Once your loan amount exceeds the conforming loan limit, everything changes. 

The biggest difference is that the automated underwriting guidelines created by Fannie Mae, Freddie Mac, FHA, VA or USDA no longer apply.

Jumbo loans are manually underwritten using guidelines developed by the investor that is offering the loan program. This means that every investor is going to have slightly different rules.

The great news with Jumbo financing is that there are many more options today than there have been over the past 10 years.  Jumbo financing was difficult to come by for many years after the great real estate crash of 2008.

Hard Money

Hard money, or Private money loans are available for non-owner occupied properties, with a minimum of 30% to 45% down payment.  These loans require equity only, with a limited application and documentation process.

Hard money loans are most commonly used when purchasing fix and flip, or fix and refinance properties. It's affordable money, when you have no other options, and the opportunity cannot be passed up.

It is not uncommon to close a hard money in 7 to 10 business days.

Student Loan Guidelines

Qualifying for a Mortgage with Student Loans

Student loans plague Americans to the estimated tune of $1.4 Trillion dollars according to the Comet Financial Intelligence website.

There have been many changes in the way that deferred, and loans in forbearance are treated when calculating your debt to income ratio.  Even worse hit have been the rules about using IBR, Income Based Repayment guidelines have changed multiple times since 2015.

These underwriting guidelines are accurate to the best of my knowledge, as of the writing of this article, September, 2018.

Fannie Mae Student Loan Guidelines

How Fannie Mae Desktop Underwriter (DU) Automated Underwriting System (AUS) will calculate your student loan payments, depends on whether or not your loan is in repayment or not.

Deferred or Forbearance Payments

Fannie Mae no longer allows an underwriter to ignore a student loan that shows up on the credit report that is deferred or in forbearance.  This practice ended in 2015.

You must use a 1% of the reported or documented principal balance as a payment when calculating your debt to income ratio on the loan application.

Many will convert a deferred loan into a low or $0 payment (IBR) income based repayment plan.

Income Based Repayment

Fannie Mae allows the use of your IBR, income based repayment as reported on your credit report.  If the payment is $0, and can be documented as accurate, you can use $0 as the payment when calculating your debt to income ratio.

Freddie Mac Underwriting Guidelines

These guidelines apply specifically to how the Freddie Mac LPA (Loan Product Advisor) Automated Underwriting System will treat the calculation of your student loan payments.  A Freddie Mac loan is considered to be a Conventional Mortgage.

Deferred or Forbearance Payments

Freddie Mac does not allow an underwriter to ignore a student loan that shows up on the credit report that is deferred or in forbearance.

Beginning November 1st, you must use a .5% of the reported or documented principal balance as a payment when calculating your debt to income ratio on the loan application.

Many will convert a deferred loan into a low or $0 payment (IBR) income based repayment plan.

Income Based Repayment

Freddie Mac will currently allow you to use the income based payment as reported on your credit report.  If your IBR payment is $0, you must use .5% of the balance when calculating your debt to income ratio.  

If you have an IBR payment plan with a $0 payment, use Conventional financing underwritten with Fannie Mae guidelines.

Income Based Repayment

Fannie Mae will allow you to use the income based payment as reported on your credit report.  If the payment is $0, beginning November 1st, 2018 you must use .5% of the balance when calculating your debt to income ratio.

FHA Student Loan Guidelines

These guidelines apply to how the Fannie Mae DU (Desktop Underwriter) or Freddie Mac LPA (Loan Product Advisor) Automated Underwriting Systems running FHA will calculate your student loan payments.

Manually underwriting a FHA mortgage will not change these student loan guidelines.

Deferred or Forbearance Payments

FHA does not allow an underwriter to ignore a student loan that shows up on the credit report that is deferred or in forbearance.

You must use a 1% of the reported or documented principal balance as a payment when calculating your debt to income ratio on the loan application.

Many will convert a deferred loan into a low or $0 payment (IBR) income based repayment plan.

Income Based Repayment

FHA will not allow you to use the income based payment as reported on your credit report.  You must use 1% of the reported or principal balance of all of your student loans as your payment when calculating your debt to income ratio.

VA Student Loan Guidelines

These guidelines apply to how the Fannie Mae DU (Desktop Underwriter) Automated Underwriting System will calculate your student loan payments.  Manually underwriting a FHA mortgage will not change these student loan guidelines.

Deferred or Forbearance Payments

VA does not allow an underwriter to ignore a student loan that shows up on the credit report that is deferred or in forbearance.

You must use a 1% of the reported or documented principal balance as a payment when calculating your debt to income ratio on the loan application.

Many will convert a deferred loan into a low payment (IBR) income based repayment plan.

Income Based Repayment

VA will not allow you to use the income based payment as reported on your credit report.  You must use the following calculation for the payment to be used when calculating your debt to income ratio:

  • Principal or reported balance x 5% / 12
  • Example:  100,000 student loans x 5% = $5,000 / 12  = $416.67
  • $416.67 would be used as your student loan payment when applying for a VA mortgage.

USDA Student Loan Guidelines

These guidelines apply to how the USDA (GUS) Government Underwriting System Automated Underwriting System will calculate your student loan payments.

Deferred or Forbearance Payments

USDA does not allow an underwriter to ignore a student loan that shows up on the credit report that is deferred or in forbearance.

You must use a 1% of the reported or documented principal balance as a payment when calculating your debt to income ratio on the loan application.

Income Based Repayment

USDA will not allow you to use the income based payment as reported on your credit report.  

You must use 1% of the reported or principal balance of all of your student loans as your payment when calculating your debt to income ratio.

Jumbo Student Loan Guidelines

Jumbo loans are by definition a portfolio loan.  This means that the lender that writes the underwriting guidelines will define how student loan payments are calculated for your debt to income ratios.

It is not uncommon for Jumbo lenders to be more strict than conventional mortgage underwriting.  It is also not uncommon for there to be some flexibility as a result of compensating factors like loan to value, reserves, employment or credit history.

A loan officer that has a lot of experience with Jumbo mortgages will be able to pretty quickly offer you what options are available to them.

Keep in mind that because these guidelines follow the lender, different lenders may treat the status of your student loans differently.

Portfolio Student Loan Guidelines

A Portfolio loan is not a specific loan program, but represents a broader channel of loans that are underwritten by each individual lender.  

It is not uncommon for a portfolio lender to be more flexible than conventional mortgage underwriting.  It is also not uncommon for there to be some flexibility as a result of compensating factors like loan to value, reserves, employment or credit history.

A loan officer that has a lot of experience with niche investors and portfolio mortgages will be able to pretty quickly offer you what options are available to them.

Keep in mind that because these guidelines follow the lender, different lenders may treat the status of your student loans differently.

Waiting Periods

Life After Bankruptcy or Worse

Since the economic crash in 2008, a lot of good people got caught up in bad times, which ultimately resulted in bankruptcy, foreclosure, short sale, or deed in lieu of foreclosure.

This is not the end of the road for you, far from it.  You're stranding at the beginning of the road, in preparation to become a home owner again as soon as reasonably possible.

The only penalty for having a major financial hardship, is a pre-determined waiting period, and stay out of trouble.  You still have to have steady employment, and no credit issues after a bankruptcy, and have to meet all other qualifying criteria.

We have specialized in these guidelines since 2011, and have seen hundreds of different scenarios and situations.  It is not uncommon for an inexperienced loan officer to not know all of these guidelines.

The most common mistake that I see both consumers and inexperienced loan officers make is that they know the guidelines for one set of underwriting guidelines, and mistakingly apply those guidelines across all situations.

Following are the most current waiting period guidelines for the current year.

2018 FHA Guidelines

  • Bankruptcy – You are eligible for a FHA loan TWO (2) years after a Chapter 7 Bankruptcy.  You are eligible for a FHA loan ONE (1) year with a Chapter 13 Bankruptcy.
  • Foreclosure – You are eligible for a FHA loan THREE (3) years from the sale/deed transfer date.
  • Short Sale / Deed in Lieu – You are eligible for a FHA  loan THREE (3) years from the sale/deed transfer date. FHA treats short sale, deed in lieu and foreclosure as the same waiting periods.

Credit must be re-established no late payments in past 12-24 months, depending on hardship

Application Date must be after the above waiting period to be eligible for FHA financing after hardship.

2018 VA Guidelines

  • Bankruptcy Ch 7 – You are eligible for a VA Veteran home loan TWO (2) years from the discharge date on a chapter 7 Bankruptcy.
  • Bankruptcy Ch 13 – If you have finished making all payments satisfactorily, the lender may conclude that you have reestablished satisfactory credit.
    • If you have satisfactorily made at least 12 months worth of the payments and the Trustee or the Bankruptcy Judge approves of the new credit, the lender may give favorable consideration.
  • Foreclosure / Deed in Lieu – You are eligible for a VA Veteran home loan TWO (2) years from the sale/deed transfer date.
  • Short Sale – VA does not recognize a short sale as a derogatory event.  If you are able to credit qualify for a VA loan, a short sale would not prevent you from being eligible for VA financing. – Updated since 4/2016

Credit must be re-established with a minimum 620 credit score

Application Date must be after the above waiting period to be eligible for VA financing after hardship.

2018 USDA Guidelines

  • Bankruptcy – You are eligible for a USDA loan THREE (3) years from the discharge of a Chapter 7 or 13 Bankruptcy
  • Foreclosure – You are eligible for a USDA loan THREE (3) years from the sale/deed transfer date.
  • Short Sale / Deed in Lieu of Foreclosure – Deed in lieu of foreclosure will be viewed as a foreclosure. You are eligible for a USDA loan THREE (3) years from the sale/deed transfer date.
  • UPDATED 12/2014 – Mortgage debt included in Bankruptcy will go by BK discharge date, and and subsequent foreclosure will not count as an additional waiting period, as long as you are off title for any defaulted mortgages.
  • Current USDA Guideline – HB-1-3555  Attachment 10-B  See Page 31 of 34

Date of Credit Approval must be after the above waiting period to be eligible for USDA financing after hardship.

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2018 Conventional (Fannie Mae) Guidelines

  • Bankruptcy – You are eligible for a Conventional, Fannie Mae loan after your Chapter 7 bankruptcy has been discharged for FOUR (4) years, TWO (2) years from the discharge of a Chapter 13
  • Foreclosure – You are eligible for a Conventional, Fannie Mae loan SEVEN (7) years after the sale date of your foreclosure.  Additional qualifying requirements may apply,
  • Foreclosure / Short Sale / DIL included in Bankruptcy – You are eligible for a Conventional, Fannie Mae loan after a minimum FOUR (4) years from the DISCHARGE of a Chapter 7 Bankruptcy, TWO (2) years from the DISCHARGE of a Chapter 13 Bankruptcy
  • Short Sale / Deed in Lieu of Foreclosure – UPDATED – Effective 7/29/2014:  Short Sale or Deed in Lieu of Foreclosure not included in a Bankruptcy has a new Waiting Period of FOUR (4) years from date your name is removed from title.

Credit must be re-established with a minimum 620 credit score.

2018 Conventional (Freddie Mac) Guidelines

Bankruptcy (7,11,13) – You are eligible for a Conventional, Freddie Mac home loan FOUR (4) years from the discharge date of your bankruptcy. Or as determined by Loan Products Advisor (LPA)Automated Underwriting System (AUS)

  • Foreclosure – You are eligible for a Conventional, Freddie Mac loan SEVEN (7) years after the sale date of your foreclosure.
  • Foreclosure / Short Sale / DIL included in Bankruptcy – You are eligible for a Conventional, Freddie Mac loan FOUR (4) years from the sale date of your foreclosure.
  • Short Sale / Deed in Lieu of Foreclosure – You are eligible for a Conventional, Freddie Mac loan FOUR (4) years from the sale date of your foreclosure.

Credit must be re-established with a minimum 620 credit score.

Fannie Mae and Freddie Mac have reduced waiting periods in cases of extenuating circumstances

Date of Credit Report must be after the above waiting period to be eligible for Conventional financing after hardship.

NOTE:  I do not yet have a success story for someone qualifying for the reduced time frames that Freddie Mac proposes to offer.  That shouldn’t stop you from trying.

2018 Jumbo Mortgage Guidelines

  • Bankruptcy – You are eligible for a Jumbo mortgage loan once any chapter of bankruptcy has been discharged for FOUR (4) years, FIVE (5) years if multiple bankruptcy occurs on credit profile.
  • Foreclosure – You may apply for a Jumbo mortgage loan SEVEN (7) years after the sale date of your foreclosure.  Additional qualifying requirements may apply,
  • Short Sale / Deed in Lieu of Foreclosure – You may apply for a Jumbo mortgage loan:
    • SEVEN (7) Years from Short Sale or Deed in Lieu of Foreclosure with Maximum 80% Loan to Value
    • NOTE: There are investors out there that will allow you to buy again in FOUR (4) years after a short sale, but expect higher rates, higher fees, and possibly larger down payment requirement.  Jumbo lenders have not yet loosened up the qualifying guidelines for buying after a hardship.
    • It may make financial sense to consider a portfolio Jumbo lender that offer high rates, so that you can take advantage of today’s market.  Once your short sale is seasoned, refinance into a more favorable, longer term loan.

NOTE:  If hardship is the result of an extenuating circumstance, waiting periods may be reduced.  Contact lender for details.

Portfolio Loans

Portfolio loans are becoming more and more common in the 2018 market. Investors offer a wide range of relaxed waiting periods for bankruptcy, foreclosure, short sale and deed in lieu of foreclosure.  

These are not necessarily subprime loans, but they do often have higher interest rates, and higher closing costs.

Portfolio loans are offered by investors that are looking at other compensating factors, like high credit scores, low loan to value (larger down payments), and reserves.

It often makes sense to take advantage of a real estate opportunity using a portfolio loan as a “bridge”. This type of financing will get you into your home until you reach your waiting period for refinancing into a loan with better terms.