FHA Mortgage Loans With No Overlays FHA Lenders

Gustan Cho Associates are mortgage brokers licensed in 48 states

Gustan Cho Associates is a mortgage company licensed in multiple states and are experts in originating FHA mortgage loans with no overlays. Over 75% of our clients are borrowers who could not qualify or got denied by other mortgage lenders. Most lenders have overlays on FHA, VA, USDA, and conventional loans. Not at Gustan Cho Associates. GCA Mortgage has a no-lender overlay business model on government and conventional loans.

Last Minute Loan Denial Due To Borrower Not Being Properly Qualified

The pre-approval stage of the mortgage process is the most important process. The number one reason for a last-minute loan denial is that the loan officer did not properly qualify the borrower prior to issuing a pre-approval letter. Many loan officers will properly qualify the borrower. They will run a tri-merger credit report, run DU/LP automated underwriting system (AUS), get an AUS Approval on findings, thoroughly review borrower’s documents and income, and comb the credit report for errors or misinformation. With AUS Findings approval, the loan officer then issues a pre-approval for the borrower. The homebuyers enter into a real estate contract and the mortgage process starts. Then well into the mortgage process, the borrower gets denied by the mortgage underwriter. Not good!!! The reason for the denial is that the lender has credit score overlays and debt to income ratio overlays on FHA loans.

FHA Lender Overlays Explained

Lender overlays are higher lending requirements than the minimum agency mortgage guidelines of HUD, the parent of FHA, imposed by the lender. The borrower needs a 580 credit score to qualify for a 3.5% down payment FHA loan. However, most lenders will have higher credit score requirements than the minimum FHA credit score requirements. Most require a 620 FICO or higher. The maximum credit score to get an approve/eligible per automated underwriting system (AUS) is 46.9% front end and 56.9% back end DTI. Again, most lenders will have lower credit score requirements as part of their lender overlays. One of the biggest mistakes loan officers can make is not thoroughly checking their employer’s lender overlays. This is one of the main reasons for a mortgage loan denial. Gustan Cho Associates has zero FHA lender overlays. We just go off the AUS findings or manual underwriting guidelines.

HUD-Approved Lenders Originate And Fund FHA Loans

FHA mortgage loans are a great mortgage loan program for first-time home buyers and home buyers with less than perfect credit, lower credit scores, and higher debt to income ratio. The U.S. Department of Housing and Urban Development (HUD) is the parent of The Federal Housing Administration (FHA). HUD is not a lender. HUD has nothing to do with the origination, processing, underwriting, and funding of FHA Loans. The Federal Housing Administration is a government entity that insures FHA loans originated and funded by private lenders in the event borrowers default and foreclose on their FHA Loans. In order for HUD to insure and partially guarantee lenders against losses on defaulted loans that go into foreclosure, lenders must be HUD Approved.

In order for HUD to insure lenders on borrowers who default and/or foreclose on their FHA loans, lenders need to follow HUD Guidelines when underwriting FHA Loans.

The Reason Why FHA Loans Are So Popular

FHA Loans is the most popular mortgage loan program in the United States for first-time homebuyers with low credit scores, bad credit, and high debt to income ratio. FHA mortgages benefit borrowers with less than perfect credit, higher debt to income ratios, and first-time home buyers. To qualify for a 3.5% down payment home purchase FHA loan, the borrower needs a 580 credit score. Borrowers with under 580 FICO and down to 500 credit scores can qualify for an FHA loan with a 10% down payment. One thing borrowers need to understand is that not all Lenders offer FHA Loans With No Overlays.

Are There Lenders Who Originate FHA Mortgage Loans With No Overlays?

We will discuss what FHA Mortgage Loans With No Overlays are. Not all lenders have the same lending requirements on FHA loans. All lenders require all of their borrowers to meet the minimum HUD Agency Guidelines on FHA loans. However, lenders can have lender overlays on FHA loans. Lender overlays are additional lending requirements that are above and beyond the minimum agency guidelines set forth by HUD on FHA loans. There are typical common overlays lenders often have. Borrowers need to understand just because they meet HUD Guidelines does not mean that they qualify with all lenders on FHA loans. Just because a home buyer gets denied by one lender does not mean they cannot qualify with another.

GCA Mortgage Business Model Is Originating FHA Mortgage Loans With No Overlays

Gustan Cho Associates is a mortgage company licensed in multiple states with no overlays on government and conventional loans. Gustan Cho Associates is one of the few national mortgage companies that offer FHA Mortgage Loans With No Overlays. Over 75% of our borrowers are folks who could not qualify at other lenders due to their lender overlays.

Home Purchase With FHA Mortgage Loans With No Overlays

FHA Loans allow a home buyer to be able to purchase a home with as little as a 3.5% down payment with a 580 credit score. Homebuyers with a prior bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale can have a second chance and be able to purchase a new home. This holds true as long as they have re-established their credit and can get an approve/eligible per automated underwriting system. Homebuyers with credit scores down to 500 FICO are eligible to qualify for FHA loans. However, if the borrower has under 580 credit scores and is down to a 500 FICO, HUD Guidelines require a10% versus 3.5% down payment. Outstanding collections and charged-off accounts do not have to be paid. The Federal Housing Administration also allows borrowers to have their down payment gifted from relatives or family members.

The Federal Housing Administration Also Allows Non-Occupant Co-Borrower

FHA mortgage loans have much lenient lending guidelines than Fannie Mae or Freddie Mac conventional mortgage loan programs.cThe minimum credit score to qualify for an FHA Loan is 580 FICO with a 3.5% down payment. For conventional loans, the minimum credit score required to qualify for a conventional loan is 620 FICO. Down payment requirements for a conventional home buyer is 3% down payment for the first-time home buyers and 5% for seasoned home buyers. First-time homebuyers are defined as someone who did not own a home in the past three years. HUD allows family members to be added on as non-occupant co-borrowers (more than one non-occupant co-borrowers is allowed). VA only allows spouses married to a veteran borrower to be added as co-borrower.

FHA Mortgage Lenders With Zero Overlays

Not all FHA mortgage lenders have the same FHA mortgage lending criteria:

  • Many lenders have mortgage lender overlays
  • Lender overlays are additional mortgage guidelines imposed by individual lenders that are above and beyond  the minimum agency mortgage guidelines set by HUD
  • For example, the minimum credit score to qualify for an FHA loan with a 3.5% down payment is 580 FICO
  • However, lenders may have overlays on credit scores
  • Most lenders will not accept any borrowers with at least a 620 FICO score due to their lender overlays

Other examples of mortgage lender overlays are minimum credit tradeline requirements.

Typical Lender Overlays

Typical Lender Overlays

Some lenders require a minimum of 3 credit tradelines that have been seasoned for at least 24 months while others require 12 months seasoning requirements as their overlays:

  • Some lenders require rental verification
  • This holds true even though DU FINDINGS does not require rental verification
  • Borrowers can get approved for mortgage loans with unpaid old collections
  • Certain lenders might require that all collections be paid off prior to closing as part of their overlay requirements
  • The maximum back end debt to income ratio to qualify for FHA loans is 56.9%

Many lenders will have overlays capping back-end debt to income ratios at 50% or even lower.

FHA Mortgage Loans With No Overlays For Borrowers

Over 75% of our borrowers are folks who either got a last-minute mortgage loan denial or are stressing during their current mortgage process with another lender. The main reason for stress during the mortgage process or a mortgage denial by an underwriter is due to the fact that borrowers were not properly qualified. Borrowers were issued pre-approval letters by a loan officer without the file being underwritten. All of our pre-approvals at Gustan Cho Associates are full credit loan approvals/loan commitment that has been fully underwritten and signed off by our mortgage underwriters. This is the reason why we close 100% of all our pre-approvals. There is no reason why any borrower who was issued a pre-approval letter should not just close but not close on time.

Why We Close Most Of Our Mortgage Loans

Gustan Cho Associates is a mortgage company licensed in multiple states with no overlays on government and conventional loans:

  • We can help borrowers who cannot qualify at other lending companies
  • As long as the borrower gets an approve/eligible from Fannie Mae and/or Freddie Mac Automated Underwriting System DU FINDINGS, Gustan Cho Associates will close the loan
  • The automated findings are the borrower’s conditional loan approval
  • Whatever the DU FINDINGS state is the conditions that are required for the clear to close (CTC)
  •  Debt to income ratios requirements to get an approve/eligible per AUS FINDINGS  is 46.9% front end and 56.9% DTI back end
  • No rental verification (If AUS does not request)
  • Outstanding collections do not have to be paid
  • Charge offs do not matter and do not have to be paid

The minimum credit score required is 580 to qualify for a 3.5% down payment FHA Mortgages.

Common Mortgage Overlays By Lenders

As mentioned earlier, most lenders have overlays which are mortgage guidelines that are above and beyond those of FHA Guidelines.

Here are typical common lender overlays:

  • Many lenders will not go under 620 credit scores on FHA Loans
  • This is called a lender overlay on credit scores

Debt To Income Ratio Overlays:

  • The maximum debt to income ratio to get approve/eligible per AUS is 46.9% front end and 56.9% back end
  • Many lenders will cap debt to income ratio at 45% to 50%

Many lenders will want borrowers to pay off outstanding collections and charge offs:

  • This is not required by the lender with no overlays

Timeshare Foreclosure:

  • Many lenders treat timeshare foreclosures as real estate foreclosure:
  • However, under HUD Guidelines, timeshares are not real estate and are installment loans
  • So there is no waiting period after a timeshare foreclosure

Overlays on credit disputes:

  • Credit Disputes on non-medical collections and any non-medical collections with an aggregate outstanding balance under $1,000 are exempt from retraction
  • Credit disputes with zero outstanding balance on non-medical collection accounts do not have to be removed
  • Credit disputes that are older than 24 months from the date of last activity do not have to be removed
  • If the aggregate total of all non-medical credit disputes total less than $1,000, those credit disputes from those creditors do not have to be removed

However, many lenders want borrowers to retract all credit disputes where retracting a credit dispute will lower credit scores. Removing credit scores can often plummet credit scores where the borrower may no longer qualify for a mortgage.

VA And FHA Loan During And After Chapter 13 Bankruptcy

VA And FHA Loan During And After Chapter 13 Bankruptcy

VA and FHA have the same mortgage guidelines when it comes to qualifying for VA and/or FHA Loans During and After Chapter 13 Bankruptcy, most mortgage companies will have overlays on qualifying for VA and/or FHA Loans During and After Chapter 13 Bankruptcy. However, under both VA and FHA Guidelines, borrowers can qualify for mortgage loans during Chapter 13 Bankruptcy Repayment Plan. This holds true as long as they have been in it for at least 12 months. There is no waiting period to qualify for both VA Loans and FHA Loans after the Chapter 13 Bankruptcy discharged date. However, most lenders will have overlays on qualifying for VA and FHA Loans After Chapter 13 Bankruptcy discharge date of two years.

Starting Loan Process On FHA Mortgage Loans With No Overlays FHA Lenders

Home Buyers who have been denied by other lenders or do not qualify due to that lender overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] Gustan Cho Associates is a mortgage company licensed in multiple states with no overlays on government and conventional loans. We have zero lender overlays on FHA, VA, USDA, and Conventional loans. We are also experts in non-QM loans. Gustan Cho Associates has over 50 wholesale lending partners. We have a national reputation for being a one-stop mortgage shop due to us having every non-QM and alternative financing mortgage program available in today’s market.