What Are Mortgage Guidelines

There are two types of mortgage guidelines. The first and foremost is the federal lending mortgage guidelines that is from government mortgage loans such as FHA Loans, VA Loans, USDA Loans. Fannie Mae and Freddie Mac is in charge of implementing mortgage guidelines for conventional loans. The second type of mortgage guidelines are called mortgage lender overlays which are mortgage guidelines implemented by each individual mortgage lenders that are above the minimum federal mortgage lending guidelines mandated by FHA, VA, USDA, Fannie Mae, and Freddie Mac. Most mortgage lenders do have mortgage lender overlays, however, there are a few select mortgage lenders like myself who do not have mortgage lender overlays and will strictly go off the federal minimum mortgage guidelines. On this mortgage blog article post, we will mainly cover on cases where borrowers are issued mortgage loan denials due to not meeting mortgage lending guidelines.

How Do Mortgage Applicants Get Pre-Approved?

If you are thinking of buying a home and want to start shopping for a house to purchase, you will need a pre-approval letter from a mortgage lender. Mortgage lenders may or may not have mortgage lender overlays which are additional credit requirements on top of the federal minimum mortgage lending requirements. If you have had prior credit issues, have lower credit scores, or have higher debt to income ratios, you should consult with a mortgage lender like myself who just go off the automated findings and have no mortgage lender overlays. An example on mortgage lender overlays are credit score and debt to income ratio overlays. For example, FHA only requires a 580 FICO credit score for a 3.5% down payment home purchase FHA Loan. A large percentage of my mortgage loan clients have credit scores of under 600 FICO. However, most mortgage lenders do not want to approve a mortgage loan borrower with credit scores of under 640 FICO. This is called a mortgage lender overlay on credit scores. Another example of lender overlays is debt to income ratio lender overlays. FHA requires a maximum back end debt to income ratio overlays of 56.9%. However, most mortgage lenders will have a cap on debt to income ratios of no greater than 45%. This is called a debt to income ratio mortgage lender overlays. There are many mortgage lender overlays to list. It is up to the individual mortgage lender on what types of mortgage lender overlays they will require on their mortgage loan applicants.

What If You Are Told You Do Not Qualify For Home Loan?

If you are told that you do not qualify for a home loan, find out from your mortgage loan originator why you do not qualify? Is it because you do not meet federal lending mortgage guidelines? Or is it because you do not meet that mortgage lender overlays? Chances are that you do not meet that particular mortgage lender overlays. As long as you meet the minimum federal lending mortgage guidelines, mortgage lenders like myself will have no issues approving your mortgage loan. If you are told that you do not qualify for a home loan due to the particular mortgage lender overlays, please contact Gustan Cho Associates at 262-716-8151. We have no mortgage lender overlays and will just go off the findings of the Automated Underwriting System. As long as you meet the conditions of the automated approval, we should have no problem in closing your home loan.

Mortgage Companies With Lender Overlays

As mentioned earlier, if you have prior bad credit with open collection accounts, judgments, tax liens, prior bankruptcy, prior foreclosure, prior deed in lieu of foreclosure, lower credit scores, or high debt to income ratios, your best bet is to go with a mortgage lender that has very little or no mortgage lender overlays. Mortgage lenders with no mortgage lender overlays will just follow the minimum federal lending mortgage guidelines. All mortgage loan applications will go through either Fannie Mae and/or Freddie Mac Automated Underwriting System. The automated system will render an approve/eligible, refer/eligible, or refer/ineligible. An approve/eligible is what you want and as long as a mortgage loan borrower can provide all the conditions that has been listed on the automated findings, then a mortgage lender with no lender overlays should be able to close the mortgage loan with no issue.


The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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