Conventional loans are also known as conforming loans, which follow Fannie Mae and Freddie Mac guidelines.
They have stricter guidelines than FHA loans when it comes to credit and income.
Conventional standards for appraisals can be easier when it comes to passing inspection.
There are both benefits to the borrower and lender:
The lender issues loans based of risk.
Usually the higher the risk, the higher the interest rate.
With FHA mortgages, the risk is reduced due to FHA insuring the loan.
Risks are usually factored by credit score, amount of down payment, housing ratios, borrower’s credit history, property location, and other factors.
FHA is far more forgiving when it comes to unpaid collections, lower scores, housing ratios, bankruptcy, foreclosures, deed in lieu of foreclosures, short sales, tax liens, charge off accounts, and even lates.
Prior Poor Credit | FHA Loans Poor Credit
Sometimes events can happen that lead people with ending up with poor credit history that cause lower FICO scores.
Proper planning can avoid credit issues and guidance with derogatory remarks can help increase the overall credit score and credit profile.
Issues can arise with credit scores when it comes to unemployment, loss of job/business, medical reasons, divorce or other life circumstance that can disrupt income and the ability to make positive influences on credit profiles.
Depending on the Automated Underwriting System (AUS) results, some collections are not required to be paid off.
Some lenders require more collections to be paid off than others due to an internal guideline.
Nicholas Auriemma is a Loan Originator at Nationwide Mortgage & Realty, LLC, providing information on mortgages that can often be confusing even to real estate and mortgage professionals. Borrowers can be discouraged because mortgage professionals can be mistaken due to guidelines always changing, the extent of guidelines, their company having an overlay (a stricter guideline), or other lenders not offering a loan program. Call or text Nick anytime at 630-779-8430 or email at firstname.lastname@example.org.
Restrictions may apply. All loans are subject to credit, underwriting and property approval guidelines. Nationwide Mortgage & Realty, LLC is not acting on behalf of or at the direction of HUD/FHA or any government agency. CO: Check license status of your mortgage loan originator at www.dora.state.co.us/real-estate/index.htm. Also licensed in: CA, FL. VA, and TX: NMLS ID 276777. Illinois Residential Mortgage License | MB. 6760210. WA: Consumer Loan License MB-276777. GA: Georgia Residential Mortgage Licensee 60857