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Tuesday, January 3, 2012

Quick Reference Guide for Conventional Loans

This is the third in a series of posts meant to provide you with a some quick and easy guidelines for the most common and popular loans - as well as a few niches - in addition to defining some benefits of the various loan programs for the right customers.  On Monday I provided a quick reference guide for FHA loans and on Tuesday, the quick reference guide was for VA loans.  Today, as promised, conventional loans is the quick reference flavor of the day.  Feel free to call or email if you have any questions or you can leave comments down below and I will address those as well.  Here you go:

Conventional loans offer several alternatives to fill the gaps:
Program guidelines:
            Loan-to-Value:  up to 97%
            Debt-to-Income Ratio:  as high as 45%
            Minimum Credit Score:  620+ (best with 680+)
            Mortgage Insurance: 
            1)    required on loans over 80% LTV
            2)    no up-front MI, only monthly (97% is better than FHA with the same monthly factor and no up-front insurance)
Reserves:  typically 2 months PITI but depends on the program
            Bankruptcy:  Need re-established credit
            1)    Chapter 7 – eligible 4 years from the discharge date
            2)    Chapter 13 – eligible 2 year from the filing with Trustee’s approval
Foreclosure / short sale:  eligible 7 years from the foreclosure date or sale date.

Benefits to the buyer:
            1)    Lots of down-payment / loan program options
            2)    Non-owner occupied and 2nd home financing allowed
            3)    Debt ratios up to 45%
            4)   Reserve requirements dependent upon program
            5)   Lowest payment option available with 20% down and no mortgage insurance.

D. Jed Wunderli
Certified Mortgage Planner
Alterra Home Loans

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