Mortgage Guidelines Outlook

Mortgage Guidelines Outlook Due To Economic Slowdown

Gustan Cho Associates are mortgage brokers licensed in 48 states

This blog will cover the mortgage guidelines outlook due to the economic slowdown and high inflation. Mortgage Guidelines Outlook Due To Economic Slowdown of the coronavirus will affect borrowers with lower credit scores. Mortgage rates skyrocketed to over 7.0% in 12 months.

A little over a year ago, mortgage rates were as low as 2.5% on a 30-year fixed-rate mortgage. Many lenders have gone out of business. The ones that have not shut down are operating on a very thin margin. Many lenders will be out of business within six to 12 months. In the following paragraphs, we will be discussing mortgage guidelines outlook due to skyrocketing rates and historic high levels of inflation.

Is 2023 Going To Be a Better Year To Buy a House?

Mortgage guidelines outlook due to high rates and economic slowdown seem bleek. Non-QM mortgage lenders are adding more overlays on non-QM and alternative mortgage loan programs. Government and conventional loans are seeing a lot of overlays being implemented by lenders.

The mortgage industry took a major hit due to the economic coronavirus pandemic. One topic the media is not covering is the changes in the mortgage industry after the economic shutdown in the United States. Many lenders have suspended operations. All non-QM lenders have halted operations on non-QM loans.

Mortgage Guidelines Outlook on Non-QM Loans

Borrowers who locked their non-QM loans and got clear to close are now null and void. Many non-QM lenders went out of business. Only two national non-QM lenders may still be in business where. They will be making an announcement within a few weeks. Many lenders imposed overlays on credit scores.

Many lenders with minimum credit score requirements on FHA loans of 580 FICO have raised them to 640 to 680 credit scores. There are no minimum credit scores on VA loans. However, most lenders implemented lender overlays on VA loans. Now most lenders require a 640 to 680 FICO on VA loans. Most lenders have stopped doing manual underwriting and other specialty loan programs such as DPA, one-time construction, 203k loans, and reverse mortgages. The great news, it is business as usual at Gustan Cho Associates.

Mortgage Loans For 500 Credit Scores

Gustan Cho Associates still originates and underwrites government loans with under 620 credit scores and down to 500 FICO. We are one of the few national lenders that have not raised credit score guidelines on government and conventional loans.

Gustan Cho Associates has zero lender overlays. This article will discuss and cover the Mortgage Guidelines Outlook Due To Economic Slowdown.

Changes In Mortgage Guidelines Post COVID-19 Scare Tactics

The coronavirus pandemic has hit the U.S. like a category-10 hurricane. The U.S. economy was stronger than ever before the coronavirus pandemic hit our nation. The stock market was at an all-time high, the unemployment rate hit a 50-year low, homeownership hit a historic high, and the housing market forecast was strong. Then disaster hit. The coronavirus outbreak hit the United States, and the U.S. economy abruptly stopped.

Millions of businesses have closed and are operating at limited capacity. Unemployment claims hit 10 million in the past two weeks and are expected to increase substantially. Unemployment numbers came in north of 700,000 and are expected to hit as high as 30% in the coming weeks.

Mortgage Guidelines Before Coronavirus Outbreak

The economy was stronger than ever until the coronavirus pandemic. President Trump and his administration have implemented the coronavirus stimulus package to slow the economic damage from the pandemic. Home purchase mortgage applications have greatly decreased due to fears of homebuyers not having a job.

Many Americans fear a recession far worse than the 2008 financial crisis. Many homebuyers who planned on buying a home in 2023 have halted their plans. However, homebuyers still want to purchase a home in 2023. Due to the coronavirus pandemic, many are worried about the mortgage guideline’s outlook.

Understanding Agency Mortgage Guidelines Versus Lender Overlays

How to understand the guidelines of mortgage agencies and lenders overlays

FHA, VA, USDA, Fannie Mae, and Freddie Mac have not changed their agency guidelines. All lenders must ensure their borrowers meet the minimum agency mortgage guidelines. However, lenders can have higher lending requirements called lender overlays. Lenders can have overlays on just about everything.

For example, lenders have increased lender overlays on credit scores across the board due to the economic meltdown due to the coronavirus. For example, many lenders with a minimum 580 credit score requirement on a 3.5% down payment FHA loan have increased their overlays on credit scores to 640 to 680 FICO.

VA Loans With No Overlays

The same goes for other loan programs. VA loans do not have any minimum credit score requirements. However, due to the liquidity issues on the secondary mortgage markets, many lenders have increased credit score requirements to 640 to 680 FICO on VA loans. Many lenders have imposed tougher debt-to-income ratio overlays as well. The reason for increased lender overlays by mortgage companies is secondary mortgage markets.

Investors are shying away from buying mortgage-backed securities (MBS) on loans under 640 credit scores. Loans under 680 FICO are now considered higher-risk loans. Rates are higher, and most lenders will charge discount points.

Mortgage Lenders For Bad Credit With No Overlays

The good news is Gustan Cho Associates have not implemented any lender overlays during the coronavirus pandemic. We still originate and fund mortgages with under 620 credit scores and down to 500 FICO.

For example, one of our loan officers recently locked a VA loan with 530 FICO charging 2 points. Not all lenders have the same requirements on FHA, VA, USDA, and conventional loans.

Mortgage Guidelines Outlook

Shopping For a Mortgage With Lower Credit Scores

As mentioned earlier, all lenders need to meet the minimum agency lending requirements. However, lenders can have their own higher standards called lender overlays. For example, if you get turned down for an FHA loan with a 630 credit score from one lender, this does not mean you cannot qualify for an FHA loan with another lender that either less low credit overlays or no lender overlays.

Chase Mortgage has stopped doing FHA and other government loans until the mortgage crisis is over. They will only originate and fund conventional loans for borrowers with over 700 credit scores and a 20% down payment. Gustan Cho Associates has zero overlays on government and conventional loans.

For more questions about this article or other mortgage-related topics or to qualify for a mortgage with a lender with no overlays, please contact us at 800-900-8569 or text us for a faster response. Or email us at The team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays.