Applying For Mortgage With Another Lender When Denied

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Applying For Mortgage With Another Lender When Denied

This BLOG On Applying For Mortgage With Another Lender When Denied Was UPDATED On October 4th, 2018

How Applying For Mortgage With Another Lender When Denied

Applying For Mortgage With Another Lender When Denied:

First time home buyers or seasoned home buyers, need to realize that not all lenders have the same lending guidelines when it comes to government and conventional loans.

  • One borrower may qualify for a FHA Loan with one lender but not another lender
  • Every mortgage company can have their own lender overlays on FHA, VA, USDA, and Conventional Loans
  • All government and conventional mortgage lenders need to meet the minimum mortgage guidelines set by FHA, VA, USDA, Fannie Mae and/or Freddie Mac
  • However, they can have higher mortgage standards that is above and beyond the minimum guidelines called lender overlays

Gustan Cho Associates Mortgage Group at Loan Cabin Inc. does not have any mortgage overlays on government and conventional loans. Applying For Mortgage With Another Lender When Denied is common place.

Types Of Mortgage Lenders

what are the Types Of Mortgage Lenders

There are various types of lenders borrowers can go to such as the following institutions

  • banks
  • credit unions
  • mortgage bankers
  • mortgage brokers

First time home buyers need to educate themselves in mortgage basics:

  • Many first time home buyers go to their local banks and apply for a residential mortgage loan
  • Some get approved while others get denied
  • Applying For Mortgage With Another Lender when denied by the initial lender is often the case for borrowers with less than perfect credit
  • Just because one lender denies borrowers for a loan does not mean that they cannot qualify for mortgage with a different lender
  • Unfortunately, many first time home buyers who get denied for a mortgage think they cannot get an approval elsewhere
  • Unfortunately, many banks do not recommend first time home buyers denied for loan to other mortgage lenders without overlays
  • The banker normally just tells them that they do not qualify due to certain reasons

Reasons Why Banks Deny Mortgage Loans

What are the reasons for which banks refuse mortgage loans

Over 75% of our borrowers choose us applying for mortgage lender when denied elsewhere. The Gustan Cho Team at Loan Cabin Inc. has many borrowers who could not qualify at banks or other mortgage bankers. 

  • Every bank have their own mortgage lending guidelines on top of FHA or Fannie Mae’s minimum mortgage lending guidelines
  • These internal mortgage guidelines are called lender overlays
  • For example, the minimum mortgage lending guidelines by the Federal Housing Administration to qualify for a 3.5% down payment FHA insured mortgage loan is 580 credit score
  • However, a bank may have their own FHA lending guidelines that requires 640 credit score
  • A 639 credit score will not qualify for mortgage loan with a bank that has a 640 score overlays on credit scores on FHA Loans

Applying For Mortgage With Another Lender When Denied By Banks

How Applying For Mortgage With Another Lender When Denied By Banks

Most banks have overlays on government and conventional loans. Another example is that a bank may require collection accounts to be paid off.

  • FHA does not require borrowers to have outstanding collections and charged off accounts to be paid off
  • A bank may require borrowers need verification of rent
  • FHA and/or Fannie Mae guidelines does not require rental verification unless the FINDING on the Automated Underwriting System states so

Applying For Mortgage With Another Lender When Denied Due Rental Verification Overlays

How Applying For Mortgage With Another Lender When Denied Due Rental Verification Overlays

Rental verification can be a mandatory mortgage lender overlay by banks and mortgage companies even though AUS does not condition it:

  • Most banks do not allow for borrowers to have any late payments or derogatory credit after prior bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale
  • Again, a late payment or derogatory credit after a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale is allowed by FHA and/or Fannie Mae/Freddie Mac guidelines
  • A bank may require a cap on debt to income ratios such as no greater than a 45% debt to income ratios on FHA and VA Loans
  • The maximum FHA back to end debt to income ratio cap on FHA insured mortgage loans is capped at 46.9% front end 56.9% back end
  • VA Loans does not have a minimum credit score requirement or debt to income ratio caps
  • However, most lenders will require a minimum credit score and debt to income ratio cap on VA Home Loans
  • Most banks do not do manual underwrites
  • Borrowers who are not getting an approve/eligible per DU FINDINGS or LP FINDINGS and gets a Refer/Eligible per AUS need to seek lenders that do entertain manual underwriting on FHA and VA Loans
  • A bank may disqualify borrowers for having one or two overdrafts in bank statements over the past 12 months
  • This can be overlooked by more aggressive lenders with a good letter of explanation
  • Borrowers seeking a home loan with bad credit, a bank may not be the best choice

The Gustan Cho Team at Loan Cabin Inc. has ZERO OVERLAYS on government and conventional loans.

Applying For Mortgage With Another Lender When Denied By Credit Unions

How Applying For Mortgage With Another Lender When Denied By Credit Unions

Many folks are members of credit unions.

  • Again, as with banks, credit unions do have many overlays
  • For those with great credit and income and who are members of credit unions may want to seek to see if their credit unions can offer a mortgage
  • Credit unions take care of their members who qualify and can offer better terms and rates for their members;  better terms and rates than the local bank
  • Advantages of credit unions is that it can be a one stop shop for its credit union members
  • Credit unions not just offer mortgage loans but car loans, savings and checking accounts, and credit card accounts
  • They are similar to banks but are more lenient when it comes to mortgage guidelines and have better terms and rates than banks do
  • Many credit unions do not offer FHA, VA, USDA, mortgage loans

Mortgage Bankers

who is Mortgage Bankers

Mortgage bankers are an excellent source for a first time home buyer to see if they qualify:

  • Mortgage bankers use their own money or a warehouse line of credit to fund loans to borrowers
  • They sell their loans after they fund to the secondary market
  • Again, mortgage bankers can have their own overlays
  • Mortgage bankers are less strict than banks and credit unions
  • Most banks and credit unions may require credit scores between 640 and 680
  • There are many mortgage bankers that will qualify borrowers with credit scores down to 580 credit scores

Applying For Mortgage With Another Lender When Denied Due To Mortgage Lender Overlays

How Applying For Mortgage With Another Lender When Denied Due To Mortgage Lender Overlays

Each mortgage banker have their own lending guidelines. Just because borrowers get denied by one mortgage banker does not mean they cannot qualify with a different company.

  • There are mortgage bankers who are also mortgage brokers
  • This is the best of both worlds
  • Borrowers seeking a home loan with bad credit and a mortgage banker that cannot help them because they do not meet their credit requirements due to overlays, mortgage banker can broker mortgage loan application to a wholesale mortgage lender
  • Only a few mortgage bankers are both mortgage bankers and mortgage brokers

Mortgage Brokers May Benefit Those Seeking Home Loan With Bad Credit

Can Mortgage Brokers Take Advantage Of A Home Loan With Bad Loans

First time home buyers or seasoned home buyers seeking a home loan with bad credit, hiring an aggressive mortgage broker specializing originating home loan with bad credit can be best bet.

  • Mortgage brokers have relationships with wholesale mortgage lenders
  • Mortgage brokers also have wholesale mortgage lenders with limited overlays
  • Disadvantages of using brokers is that they are not direct lenders and have no control
  • They are dependent on the actual lender

Automated Underwriting System

What is this Can Mortgage Brokers Take Advantage Of A Home Loan With Bad Loans

As long as I can get an approve/eligible per DU FINDING and/or LP FINDINGS, I can get the mortgage loan application approved and closed in time.

  • Why deal with lenders with no overlays? 
  • The answer to this question is due to terms and rates
  • Even though I can get an approve/eligible per DU FINDINGS and/or LP FINDINGS mortgage loan application approved and closed, not all home loan with bad credit applications are alike
  • For those seeking a home loan with bad credit but have compensating factors, borrowers will get better terms and rates

Applying For Mortgage With Another Lender When Denied With Direct Lender With No Overlays

How Applying For Mortgage With Another Lender When Denied With Direct Lender With No Overlays

Home buyers seeking a home loan with bad credit and needing to qualify with a national direct lender with no overlays on government and conventional loans can contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com:

  • I specialize in helping people get a home loan with bad credit as well as prime credit borrowers
  • Minimum credit scores to qualify for a 3.5% down payment home loan with bad credit is 580
  • Debt to income ratios are capped at 56.9%
  • Open collections and derogatory credit is no problem and old unsatisfied collection accounts do not have to be paid off
  • No rental verification is required and manual underwriting mortgage loans are my specialty

Banks Have Many Mortgage Lender Overlays

Banks Have Many Mortgage Lender Overlays

Banks probably have the toughest mortgage qualification requirements.

  • I am not slamming banks and there are many advantages in dealing with local banks in getting a mortgage loan
  • One of the great advantages of working with a local banker is the convenience
  • Instead of dealing with out of state lenders and faxing or scanning documents and going back and forth, borrowers can easily stop in local bank and sign whatever documents banker needs to sign
  • Borrowers can drop mortgage documents off on their way to work or on way home
  • Borrowers who are banking with the bank applying a mortgage loan with, bank can pull bank statements
  • Go over required cancelled checks mortgage lenders require on irregular deposits and rental verification
  • However, there are disadvantages of dealing with banks also
  • Mortgage rates at banks are normally higher than mortgage bankers 
  • Banks have high overheads due to the brick and mortar expenses
  • Advertising expenses they have over mortgage bankers or mortgage brokers

Bankers Do Not Have To Be Licensed Mortgage Loan Originators

Bankers Do Not Have To Be Licensed

Banks are exempt in disclosing many of the fees and costs incurred for the mortgage loan borrower such as the yield spread premium.

  • The yield spread premium is the profit or spread mortgage lenders make on loan transactions
  • Bankers, mortgage bankers, and credit unions are exempt from disclosing the yield spread premium, also known as YSP
  • Bankers normally have many overlays
  • Mortgage overlay is any additional mortgage requirements on top of lending guideline required by FHA, FANNIE MAE, FREDDIE MAC, VA, USDA or any other GSE

Direct Lender With No Overlays

who is the Direct Lender With No Overlays

Home Buyers who need to qualify for mortgage with a national direct lender with no mortgage overlays can contact us at The Gustan Cho Team at Loan Cabin at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. We are available 7 days a week, evenings, weekends, and holidays. Gustan Cho Associates at Loan Cabin Inc. is also correspondent lenders on non-qm loans and bank statement mortgage loans for self employed borrowers.

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