FHA Facts Versus Lender Overlays By Mortgage Companies
This Article Is About FHA Facts Versus Lender Overlays By Mortgage Companies
Many home buyers often get confused when shopping for a mortgage.
- What are the FHA FACTS versus BS?
- Sharp consumers normally shop with various vendors before deciding on which company to use to buy goods and services
- Countless home buyers get conflicting information from lenders when they are shopping for a mortgage
Here are some of the questions we get from mortgage shoppers:
- Why do lenders have different credit score requirements?
- Why are the debt-to-income ratios different from lender to lender?
- Why do some lenders require collections to be paid off and other lenders don’t?
- Why do some lenders require charge-off accounts to be paid and other lenders don’t?
- What do some lenders allow manual underwriting and others don’t?
- Why do some lenders allow borrowers in a Chapter 13 Bankruptcy repayment plan to apply for FHA Loans and others don’t?
- Why do some lenders require a one to two-year waiting period after a Chapter 13 Bankruptcy discharged date and other lenders have no waiting period after a Chapter 13 Bankruptcy discharge?
In this blog, we will discuss FHA FACTS and the reason why lenders have different FHA requirements. We will explain FHA FACTS versus FHA Overlays by lenders.
FHA FACTS Versus Lender Overlays
There are two different types of mortgage guidelines when it comes to FHA Loans.
- HUD Agency Guidelines
- Lender Overlays Imposed By Individual Lenders
HUD Agency Guidelines are the FHA FACTS that are set by the Department of Housing Development (HUD). HUD is the parent of FHA and sets the minimum lending requirements on FHA loans. Borrowers who meet the minimum HUD Guidelines can qualify for an FHA loan.
HUD Agency Guidelines are FHA FACTS required in qualifying for a 3.5% down payment FHA loan. Mortgage companies can have additional lending requirements that are above and beyond HUD Agency Guidelines which are called lender overlays. Most mortgage companies have lender overlays that surpass FHA Guidelines. It is due to these lender overlays that borrowers get conflicting FHA requirements on FHA loans.
Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on FHA loans. We just go off HUD Agency Guidelines and have ZERO Lender Overlays.
Qualifying For FHA Loans
Below are FHA FACTS. If you go to a lender and hear other than the FHA FACTS below, that lender has its own mortgage overlays. Seek another lender that has no lender overlays:
- The minimum credit score to qualify for a 3.5% down payment FHA Loan is 580 FICO
- Borrowers can qualify for FHA Loans with credit scores under 580 FICO down to 500 FICO but need a 10% down payment
- Any lender that asks for a higher credit score has credit score overlays
- The maximum debt to income ratio to get an approve/eligible per automated underwriting system (AUS) is 46.9% front end and 56.9% back end
- Any lenders that have lower debt to income ratio requirements is due to their lender overlays and not HUD Agency Guidelines
- Outstanding collections and charged-off accounts do not have to be paid off to qualify for FHA Loans
- Homebuyers can purchase condos and manufactured homes with FHA Loans
- However, the condo needs to be HUD Approved and the manufactured home needs to meet HUD Guidelines
- One to four units qualify for FHA Loans as long as they are residential units
- Non-occupant co-borrowers are allowed but need to be related to the main borrower by law, blood, marriage
- Non-occupant co-borrowers who are not family members can be added to the main borrower’s loan but need a 25% down payment
- There is a 2-year waiting period after the Chapter 7 Bankruptcy discharged date
- There is a 3-year waiting period after foreclosure, deed in lieu of foreclosure, short sale
- Borrowers in a Chapter 13 Bankruptcy repayment plan can qualify for FHA Loans one year into the repayment plan with Trustee Approval
- There is no waiting period after the Chapter 13 Bankruptcy discharged date
- Any bankruptcy with less than 24 months seasoning after discharge date needs to be manually underwritten
For more information on this topic and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] We are available 7 days a week, evenings, weekends, holidays.