Do All Lenders Have The Same Guidelines On FHA Loans

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This ARTICLE On Do All Lenders Have The Same Guidelines On FHA Loans Was PUBLISHED On June 16th, 2020

Do All Lenders Have The Same Guidelines On FHA Loans is one of the most common questions we get by our viewers at Gustan Cho Associates.

  • The answer is NO
  • Lenders have different lending requirements on FHA loans
  • All lenders need to have their borrowers the minimum lending agency mortgage guidelines by the U.S. Department of Housing and Urban Development (HUD)
  • HUD is the parent of FHA
  • FHA is not a lender
  • HUD is a federal government agency in charge of insuring and guaranteeing FHA loans to mortgage lenders
  • FHA will insure and partially guarantee lenders on FHA loans that are in default and being foreclosed

Due to this government guarantee by FHA, lenders can offer FHA loans with only 3.5% down payment with lower credit scores at great mortgage rates.

FHA Loans At GCA Mortgage Group

FHA loans are one of the most popular loan programs in the United States:

  • HUD created and launched FHA loans to promote homeownership in the United States with low down payment and lenient credit guidelines
  • However, one thing borrowers need to realize is that not all lenders have the same credit guidelines on FHA loans
  • Each individual lender can have mortgage guidelines that are above and beyond those of the minimum HUD Agency Guidelines
  • The higher lending standards required by individual lenders are called overlays
  • Gustan Cho Associates Mortgage Group is a national five-star mortgage company with no lender overlays on FHA loans
  • GCA Mortgage Group is also licensed in multiple states
  • Over 75% of our borrowers at Gustan Cho Associates are folks who could not qualify at other lenders due to their lender overlays

In this article, we will discuss and cover Do All Lenders Have The Same Guidelines On FHA Loans.

Do All Lenders Have The Same Guidelines On FHA Loans: Understanding Lender Overlays

To answer the question of Do All Lenders Have The Same Guidelines On FHA Loans, one must understand what lender overlays are on FHA loans.

  • As mentioned earlier, all lenders need to have their borrowers meet the minimum HUD Agency Mortgage Guidelines
  • However, each lender can have higher lending requirements on FHA loans called lender overlays
  • For example, to qualify for a 3.5% down payment FHA loan, the borrower needs a 580 credit score
  • However, many lenders may require a 620, 640, 660, or 680 credit score on FHA loans
  • The higher credit score requirement is called lender overlays
  • Lenders can have lender overlays on just about anything
  • Remember that just because you get denied for an FHA loan from one lender does not mean you cannot qualify for an FHA loan with another lender
  • Most lenders have lender overlays
  • However, there are lenders like Gustan Cho Associates Mortgage Group with no lender overlays on government and conventional loans

GCA Mortgage Group does not have any lender overlays. We just go off by the automated findings of the automated underwriting system (AUS).

Minimum HUD Agency Mortgage Guidelines To Qualify For FHA Loans

As long as you meet the minimum HUD Agency Mortgage Guidelines, you will qualify for an FHA loan. Gustan Cho Associates has no lender overlays. We just go off the automated findings of the automated underwriting system (AUS). We have zero lender overlays on FHA loans as well as other government and conventional loans.

Below is the minimum HUD Guidelines to qualify for FHA loans:

  • One to four-unit residentially zoned owner-occupied properties only
  • The minimum credit score requirements to qualify for a 3.5% down payment FHA loan is 580 FICO
  • Borrowers with under 580 credit scores down to 500 FICO are eligible to qualify for an FHA loan but need 10% down payment
  • There is a two year waiting period requirement after Chapter 7 Bankruptcy discharged date
  • There is a three year waiting period after foreclosure, deed in lieu of foreclosure, short sale
  • Outstanding collections and charged-off accounts do not have to be paid to qualify for FHA loans
  • Borrowers can get gift funds to use for the down payment and closing costs
  • Non-Occupant Co-Borrowers allowed
  • Borrowers can have a debt to income ratios of 46.9% front end and 56.9% back end to get an approve/eligible per automated underwriting system

As long as borrowers meet the above basic HUD lending guidelines, they will qualify for an FHA loan. If told by one lender you do not qualify, then go to a lender with no lender overlays like Gustan Cho Associates.

Typical Lender Overlays

Mortgage lenders can have lender overlays on just about anything.

Below are the typical lender overlays that are very common among lenders:

  • Lenders may impose higher credit score requirements as part of their lender overlays such as 620, 640, 660, 680 credit scores when FHA minimum credit score requirement is 580 on a 3.5% down payment home purchase FHA loan
  • Under HUD guidelines, borrowers do not have to pay outstanding collections and charged-off accounts no matter how larger they are but many lenders will have overlays where they will require borrowers to pay them off
  • The maximum debt to income ratio to get an approve/eligible per automated underwriting system (AUS) is a front end of 46.9% and back end of 56.9%
  • However, many lenders will cap debt to income ratios to lower levels
  • Many lenders will not accept manual underwriting as part of their lender overlays
  • Some lenders will have lender overlays on gift funds where they will not accept gift funds for borrowers with under 640 credit scores

Lenders can impose lender overlays on just about anything.

Qualifying For An FHA Loan With A Lender With No Overlays

If you are told by a lender you do not qualify for one reason or another, study the basic FHA guidelines. If you meet all the minimum HUD guidelines for you to qualify for an FHA loan but are told you do not qualify by a lender, then go to a different lender with no overlays like Gustan Cho Associates. GCA Mortgage Group has no lender overlays on FHA loans, other government, and conventional loans. We just go off the agency minimum mortgage lending guidelines. Over 75% of our borrowers could not qualify at other lenders due to their lender overlays. To qualify for a mortgage, please contact us at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

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