Choosing A Lender With No Mortgage Investor Overlays

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This BLOG On Choosing A Lender With No Mortgage Investor Overlays Was UPDATED And PUBLISHED On November 26th, 2020

Choosing A Lender Who Is Right For You

Once deciding on becoming a homeowner and start the home buying process, one of the most decisions to make will need to make is choosing a lender.

  • Not all lenders have the same mortgage guidelines on FHA, VA, USDA, nor conventional loans
  • A home buyer can get denied by one lender and get approved with a different lender
  • Most lenders have mortgage investor overlays
  • Overlays are additional mortgage requirements that are above and beyond of agency guidelines
  • For example, FHA requires 580 minimum credit scores to qualify for FHA Loans
  • However, most lenders may have overlays on credit scores where they require 620 to 640 credit scores on FHA Loans
  • The U.S. Department of Veteran Affairs does not have minimum credit score requirements on VA Loans
  • However, most lenders will require 620 to 640 credit scores on VA Loans
  • VA does not have any debt to income ratio requirements
  • Again, most lenders have overlays on VA DTI where they require 45% to 50% debt to income ratios

In this article, we will cover and discuss Choosing A Lender With No Mortgage Investor Overlays.

Avoiding Stress By Choosing A Lender With No Mortgage Investor OverlaysChoosing A Lender

Choosing a lender home buyers to feel comfortable working with throughout the mortgage process is extremely important and will not stress borrowers:

  • The mortgage process will be stressful for many
  • This is especially when a mortgage underwriter will knit pick on a file and ask condition after condition
  • Or when the borrower provides all the list of conditions on the conditional loan approval and the mortgage underwriter will come back with another batch of conditions

Choosing a lender where borrowers feel comfortable working with is no different than choosing a doctor, accountant, insurance agent, attorney, realtor, or other business professionals.

Referrals By Realtors And Friends In Choosing A Lender

Most home buyers will ask family, friends, or real estate agents in their journey in choosing a lender.

  • This is a great start
  • Some home buyers may have friends, family, or relatives who are loan officers
  • Some may choose their lender from ads on television, radio, fliers, or newspapers
  • Others who are very private want to do their own search in choosing a lender
  • Many may go to their local bank to see if they qualify for a home loan
  • However, a large percentage of home buyers will search the internet for lenders
  • Choosing A Lender who borrowers can get along with is extremely important

However, choosing a lender who specializes in income and credit profile is more important.

Choosing A Lender Who Specializes With Borrowers Credit/Income Profile

Not everyone has 800 credit scores, perfect payment history, a 20% down payment, and low debt to income ratios.

  • Borrowers with the highest credit scores and excellent income with a substantial down payment can go anywhere and get the best terms and rates
  • Unfortunately, that is not how the real world works
  • Many hard-working Americans have had patches in their lives

They had periods of bad credit such as the following:

  • have outstanding unpaid collection accounts
  • bankruptcy
  • foreclosure or multiple foreclosures
  • deed in lieu of foreclosure
  • short sale
  • charge off accounts
  • late payment history
  • little or no down payment and/closing costs
  • gaps in employment
  • self-employed with little or no documented income
  • other credit and income issues where not all lenders can help them

Not All Lenders Have Same Loan RequirementsHow to choose a lender who specializes in the borrower's credit / income profile

One important thing home buyers need to realize is that not all lenders have the same lending requirements agency loan programs.

  • For example, not all lenders will have the same FHA requirements
  • Most FHA mortgage lenders will have FHA Lender Overlays
  • Overlays are additional lending requirements on top of the minimum FHA Guidelines that is set by the Federal Housing Administration
  • For example, to qualify for a 3.5% down payment home purchase, FHA requires a minimum credit score of 580
  • However, most banks require  640 Credit Scores to qualify for FHA Loans
  • This is called an FHA Overlay On Credit Scores
  • The lender requires a higher credit score than the minimum credit score requirements by FHA
  • Same with debt to income ratios
  • FHA allows up to 56.9% DTI for borrowers with at least 620 Credit Scores
  • However, many banks and mortgage companies have DTI Overlays
  • They require debt to income ratios are capped at 45% DTI

This is even though FHA minimum debt to income ratio caps is at 56.9% DTI.

Choosing A Lender With No Overlays On Debt To Income Ratios

Home Buyers who have a credit or income issues should do their own evaluation and seek out lenders who specialize in bad credit mortgage loans:

For example, here is a case scenario:

  • high debt to income ratio borrowers
  • lenders borrowers consulted with have overlays on debt to income ratios
  • borrowers can Google ” Mortgage Lenders With No Overlays On Debt To Income Ratios” 
  • list of mortgage lenders will appear
  • but how many lenders have no DTI Overlays
  • make sure to question loan officer they have no overlays

Choosing A Lender With No Overlays On Credit Scores

Same with low credit scores:

  • Borrowers credit scores under 600 will have a difficult time choosing a lender with no overlays on credit scores
  • Most mortgage lenders have overlays on credit scores
  • Try to Google ” Mortgage Lenders With Under 600 Credit Scores” 
  • List of mortgage loan officers and mortgage companies will show up but how many of them do not have overlays on credit scores
  • Start interviewing lenders that can assist with credit and financial profile

Choose lender borrowers to feel most comfortable with:

What If Told Borrowers Do Not Qualify From Multiple Lendershow to choose a lender without a debt / income ratio

Over 75% of our borrowers at Gustan Cho Associates Mortgage Group are folks who were told they do not qualify by multiple lenders or had multiple mortgage lender denials.

  • Most lenders have overlays on government and conventional loans
  • Even if borrowers meet the minimum agency lending guidelines, lenders may have higher lending standards than the minimum guidelines set by FHA, VA, USDA, Fannie Mae, or Freddie Mac
  • Borrowers can consult with 5 or more lenders and be told they do not qualify for a home loan
  • Many borrowers are smart and savvy
  • They will not take no for an answer
  • They will research whether or not they meet the minimum lending guidelines
  • If they do will search on Google for Mortgage Lender With No Overlays and will find a list of lenders who have no overlays

Borrowers denied by multiple lenders due to their overlays, look no further. Contact us at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com.

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