Choosing The Right Lender

Choosing The Right Lender To Get a Mortgage Loan Approval

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this blog, we will cover choosing the right lender for a mortgage loan approval. Choosing The Right Lender with no overlays is extremely important for mortgage borrowers with prior credit issues. Examples of prior credit issues include the following:

  • prior bankruptcy
  • prior foreclosure
  • prior short sale
  • prior deed in-lieu-of foreclosure
  • outstanding collections
  • charge off accounts
  • higher debt-to-income ratios
  • do not have verification of rent
  • lower credit scores
  • late payments after bankruptcy and foreclosure
  • recent late payments
  • just had a Chapter 13 Bankruptcy discharge
  • are in a current Chapter 13 Repayment Plan
  • have judgments
  • have tax liens
  • or have other credit and income issues

Not All Lenders Have the Same Mortgage Guidelines on Government and Conforming Loans

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Just because one lender says you do not qualify for a home loan does not mean that you do not qualify for a mortgage loan with another mortgage lender. The first place borrowers think about when they need a home loan is to visit their local bank and apply for a home loan there. Unfortunately, banks are one of the toughest places to qualify for home loans. Requirements at banks are much tougher than mortgage lenders with no lender overlays.

Is It Better To Get a Mortgage Approval Through a Broker or Bank?

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Most banks have mortgage lender overlays. Overlays are additional mortgage lending requirements in addition to the minimum mortgage lending requirements that FHA requires, VA, USDA, Fannie Mae, and Freddie Mac.

For example, here is a case scenario. The minimum credit score required to qualify for an FHA loan by HUD, HUD is the parent of FHA, is 580 FICO. However, most banks will not touch anyone who does not have a credit score of at least 640 FICO. The bank has lender overlays on credit scores.

 Typical Overlays By Mortgage Lenders

What are typical mortgage lender overlays

There are other lender overlays that banks and lenders have. Here are examples of typical lender overlays imposed by lenders:

  • lender overlays on debt-to-income ratios
  • overlays on collection accounts
  • charge off accounts
  • lender overlays on verification of rent
  • overlays on credit tradelines
  • manual underwriting
  • gift funds: some lenders do not allow gift funds even though HUD Guidelines allow it

Choosing The Right Lender With High Debt To Income Ratios

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There are many borrowers who do not qualify for a mortgage loan because their debt-to-income ratios are too high. Many lenders have overlays on debt-to-income ratios, especially with FHA loans.

Under FHA Guidelines on Debt To Income Ratios, the maximum debt-to-income ratio permitted is 56.9% DTI for Borrowers with credit scores of at least 620. However, most banks and lenders will cap the debt-to-income ratio limits to 45% DTI.
Choosing The Right Lender With High Debt To Income Ratios

Is It Easier To Get a Mortgage Approved Through a Broker?

Some mortgage companies will go to debt-to-income ratio caps of 50% DTI. This exception may be made as long as Borrower has credit scores of at least 680 FICO. This creates a problem for borrowers with a debt-to-income ratio of 56.9% DTI and lower credit scores. Choosing The Right Lender with no lender overlays on debt-to-income ratios, like myself, is crucial in securing an FHA loan.

Gustan Cho Associates has no lender overlays on FHA loans. Whatever the HUD Guidelines on debt-to-income ratios are what we go by. The team at Gustan Cho Associates goes by and can approve and close any borrower who meets the minimum HUD Lending Guidelines. HUD allows as many non-occupant co-borrowers to be added to the main borrower for borrowers with higher debt-to-income ratios.

Choosing The Right Lender With Outstanding Collection and Charge-Off Accounts

How to choose the right lender with a unique collection and payment of accounts

Under FHA Guidelines on Collection Accounts, outstanding collection and charge-off accounts do not have to be paid to qualify for FHA loans. However, most banks and lenders will require that all outstanding collection and charge-off accounts be paid in full. As part of their own overlays, these lenders require zero balances to be recorded on the borrower’s credit report before proceeding with the mortgage process. This is not necessary if borrowers choose the right mortgage lender.

Choosing The Right Lender With No Overlays

Choosing the right lender with no lender overlays is crucial for borrowers with many collections and charge-off accounts. Many borrowers contacted me and were told they did not qualify for multiple other lenders because they had outstanding collection and charge-off accounts.

The team at Gustan Cho Associates has helped thousands of borrowers get approved and closed on their FHA loans without needing to pay their outstanding collection and charge-off accounts. Borrowers who are told they do not qualify for an FHA loan unless they pay off their outstanding unpaid collection and charge-off accounts. Please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at, and I will be able to help you get your FHA loan approved and closed promptly.

Choosing The Right Lender With Outstanding Judgments and Tax Liens

Many mortgage companies will not take your mortgage loan file submitted into processing and underwriting if you have an outstanding judgment or tax lien on your credit report unless you have paid off the judgment and tax liens and the zero balance is reported on your credit report. There are two solutions to having judgments and tax liens where you can still have outstanding judgments and tax liens and qualify for FHA loans.

Getting Approved For an FHA Loan With Outstanding Judgments

HUD, the parent of FHA, will allow borrowers with outstanding judgments or tax liens to qualify for FHA loans if they have a written payment agreement with the judgment creditor and the Internal Revenue Service and have made at least three monthly payments. The borrower must provide the mortgage lender with three months of canceled checks. Once a written payment agreement has been made with the judgment creditor and the IRS, you cannot pre-pay the three payments upfront and need to make at least three months’ worth of payments.

Getting Approved For a Mortgage With Written Payment Agreement on Tax Lien and Judgment

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The second choice is borrowers can pay off judgment and tax lien at or prior to the closing of home loan. Borrowers will need a payoff letter from the judgment creditor and/or IRS and pay the funds to the title company. The title officer will record the payment in full. Consumers can pay a negotiated amount of the judgment as long as the judgment creditor will release the judgment.

Borrowers are told they do not qualify by other lenders due to their overlays or got a mortgage loan denial. Please give us a shout at 800-900-8569 or text for a faster response. Or email us at Let me evaluate your situation and see if we can make it work. The team at Gustan Cho Associates is seven days a week, evenings, weekends, and holidays to take your calls and answer any questions you may have.

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