The 2016 Conventional Loan Collection Accounts Guidelines are created and implemented by Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are the two government sponsored enterprises (GSEs) who are in charge of creating the conventional loan guidelines that borrowers and lending institutions must abide by. This is different from FHA Loans which are overseen by the United States Department of Housing and Urban Development (HUD). Both Fannie Mae and FHA are similar in the sense that they create the guidelines for their prospective loan programs however, the way that they treat collection accounts with regards to mortgage loan approvals differ. According to the 2016 Conventional Loan Collection Accounts Guidelines it states that borrowers can qualify for conventional loans with unpaid outstanding collection and charge off accounts without the necessity of paying them off in full before the loan is approved.
With regards to the 2016 Conventional Loan Collection Accounts Guidelines, let’s first take a step back and look at how Fannie Mae treats past due accounts on your credit report. If items are on your credit report as past due but not collection accounts, these must be brought current in order for the mortgage loan to be approve under conventional loan guidelines. Now, looking at collection accounts, if the borrower is looking to qualify for a one-unit owner occupied residence, the borrower is not required to pay off any outstanding collection accounts, regardless of the account balance. If the conventional loan borrower is looking to purchase a 2-4 unit owner occupied property, unpaid collection accounts that total more than $5,000 needs to be paid in full prior to closing on the new property. Finally, if a conventional loan borrower is looking to obtain an investment property and they have more than $1,000 in collection accounts, these must be paid in full prior to closing of the loan.
Now, just because you are looking to get a loan approved using the 2016 Conventional Loan Collection Accounts Guidelines and you feel you meet the minimum guidelines as set by Fannie Mae and Freddie Mac, you can still see that your loan approval may get denied. Situations like this can arise if the lender you are working with has their own lender overlays. What are lender overlays you may be asking, well they are additional requirements that lenders make potential borrowers meet in order for the lender to approve the loan. What these overlays are trying to do is minimize the risk involved with a particular loan program by making borrowers be “more qualified” than they would need to be otherwise. Is it fair? No, but lenders are well within their right to determine their individual requirements for loan programs.
As you can see, per 2016 Conventional Loan Collection Accounts Guidelines you can get approved for a conventional loan if you have collection accounts as long as it is a 1-unit owner occupied residence, however, if you are looking for a 2-4 unit or investment property, you will need to get current with your collection accounts in order to get approved. If you need a loan officer to walk you through the conventional loan requirements, then look no further. I am here to help you 24-7 any time day or night. Feel free to call me at 888-900-1020, email me at firstname.lastname@example.org, and visit my website www.loanconsultants.org.