Finally, Better Home Loans Available For Foreclosure, Bankruptcy and Short Sale Victims

FHA loans are more expensive than ever because Fannie Mae has adopted techniques similar to highway robbery. Ok, maybe not “more expensive than ever” because interest rates are still low. But definitely highway robbery because the price for mortgage insurance has been significantly increased. Insurance that does NOT protect you. It protects the the wealthy bank who is lending the money at your expense. It’s a sly way to charge more especially for those who have had a financial hardship and have had no other practical option for a loan. Until now…

The Sensible Alternative to FHA Now Available:

Conventional loans with a decent down payment do NOT require mortgage insurance and typically save money.  They also allow larger loan amounts for bigger/better homes.  The great news is that with a recent change in policy, homeowners with a foreclosure over 3 years ago may now get a conventional loan to buy OR to refinance a home. This can save a bundle.

Below is a letter from a loan officer that was sent to me.  It has the details:

Great news for both of us just came out last week- We can now offer Conventional financing for buyers who are 3 years out from foreclosure!  Hip Hip Hooray! This is going to open up buying power to lots of folks in your pipeline.  (The guidelines had previously required 7 years since the gloomy mortgage meltdown.)

Here’s how it’s going to help:

Larger loan amounts.  Do you have any pre- approved FHA buyers who are can’t find a house they like under FHA loan limits?  Remember, Conventional goes up to a loan amount of 417K. Those folks have a lot more homes to choose from….

Cheaper Mortgage insurance:  Buyers that were previously stuck with FHA financing that are now eligible for Conventional are going to save some $$$$$.   Conventional doesn’t require that hefty upfront fee and the monthly premiums are lower too….    Now they can afford to buy a house with a pool.  (Heaven knows they need it around here.)

Don’t forget to refer me your clients who bought homes with FHA financing previously.  They may be eligible to save money and drop mortgage insurance.

Have a great day!


Here’s the summary:

Previously, Fannie’s automated underwriting system would reject applicants who had an extenuating circumstance even though their guidelines allowed for such situations.  That meant we really could not do those deals.  No automated approval = no approval at all usually.

Now, Fannie Mae has updated their automated system.  If the borrowers can document a large reduction in income at the time of foreclosure, there is a good chance they can be approved. We have already obtained approvals on borrowers who we previously had to decline.

There’s just a bit of bad news.  Short sales just became a teensy bit harder. Until last week, buyers with a 20% down payment did not need to prove extenuating circumstances after two years… now they do.  Here’s the new matrix.”

  Extenuating Circumstances Non-Extenuating Circumstances
Foreclosures 3 Years 7 Years
Bankruptcy 2 Years 4 Years
Short-sale 2 Years 4 Years



Here’s my favorite loan officer below (she’s also my daughter):



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