Common VA Overlays By Lenders Versus Agency Mortgage Guidelines

This BLOG On Common VA Overlays By Lenders Versus Agency Mortgage Guidelines Was PUBLISHED On May 29th, 2019

Over 75% of our borrowers at Gustan Cho Associates are folks who could not qualify at other lenders due to their lender overlays.

Gustan Cho Associates at Loan Cabin Inc. is a direct lender with no overlays on VA Loans. In this blog, we will discuss Common VA Overlays by lenders.

VA Agency Guidelines Versus Common VA Overlays

Before we discuss Common VA Overlays on VA Loans, let’s go over the basic VA Mortgage Guidelines by the Department of Veterans Affairs (The VA). The VA has lenient mortgage guidelines than any other loan programs. This is because the VA understands that active and/or retired duty members of the U.S. Armed Services may have lower credit profile than their civilian counterparts due to the following reasons:

  • It is difficult to pay bills on time during deployment overseas
  • Many members of the military often get transferred from one state to another
  • Changes of address and moving family to a different state and/or country may delay paying bills on time
  • Injured and/or disabled veterans may have gaps in income where paying their bills on time is often a problem

About VA Mortgages

The U.S. Department of Veterans Affairs has created and launched VA Loans to reward our men and women of our U.S. Military. VA Loans is the best loan program available for home buyers.

  • However, to be eligible for VA Loans, the borrower needs to be an active or retired member of the Armed Services with a Certificate of Eligibility (COE)
  • In the next paragraph, we will answer the conflicting answers borrowers get by other lenders
  • One of the problems borrowers are frustrated with is loan officers will not tell borrowers they meet VA Guidelines but do not qualify with the particular lender
  • We will give you the FACTS on VA Agency Guidelines
  • When a lender says NO, you do not qualify, you will be able to determine whether or not you meet VA Agency Guidelines
  • If you meet the minimum VA Guidelines, you can qualify with a direct lender with no VA Overlays

Gustan Cho Associates Mortgage Group has no overlays on VA Loans. We just go off VA Guidelines with zero overlays.

Minimum VA Eligibility Requirements

One to four unit residentially zoned properties are eligible.

  • There is no down payment requirement on VA Loans
  • 100% financing
  • Closing costs can be covered with a sellers concession and/or lender credit
  • Maximum sellers concessions allowed is 4%
  • There are no minimum credit score requirements with an approve/eligible per AUS
  • There is no debt to income ratio caps with an approve/eligible per automated underwriting system (AUS)
  • Outstanding collections and charge off accounts do not have to be paid to qualify for VA Loans
  • There is a two year waiting period after Chapter 7 Bankruptcy, foreclosure, deed in lieu of foreclosure, short sale
  • Borrowers in Chapter 13 Bankruptcy Repayment Plan can qualify for VA Loans one year into the plan with Trustee Approval and manual underwriting
  • There is no waiting period after the Chapter 13 Bankruptcy discharge date
  • Any bankruptcy discharge that is seasoned for less than two years needs to be manually underwritten

The above information is the VA FACTS on VA Guidelines.

Typical Common VA Overlays By Mortgage Lenders

In this last paragraph, we will discuss many frustrations borrowers get when shopping for a mortgage. Many lenders give borrowers conflicting answers when they qualify them. Not all mortgage companies have the same VA Guidelines. Most lenders have overlays on VA Loans. Here are typical Common VA Overlays by mortgage lenders who have lender overlays:

  • They often require a minimum credit score requirement when the VA does not have one
  • Many lenders will have a maximum debt to income ratio requirements of 41% to 50% DTI when the VA has no maximum DTI requirements as long as the borrower gets an AUS APPROVAL
  • Many lenders will have overlays on collections and charge off accounts where they require borrowers to pay them off
  • Many lenders will not take a borrower who is in a current Chapter 13 Bankruptcy repayment plan 
  • Many lenders require a one or two year waiting period after a Chapter 13 Bankruptcy discharge date when the VA does not mandate a mandatory waiting period after a Chapter 13 discharge
  • Many lenders do not do manual underwriting

For more information on this topic or other topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at [email protected] We are direct lenders with no overlays on VA Loans.

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