Over Third Of Mortgage Lenders Loosen Lending Overlays

Mortgage Lender Overlays

Gustan Cho Associates

Lenders Loosen Lending Overlays

The Federal Reserve Board announced that almost a third of commercial and residential mortgage lenders loosen lending overlays in the 3rd Quarter and they expect lenders loosen lending overlays even more on the 4th Quarter.  Lenders loosen lending overlays have sparked a sharp increase in mortgage applications nationwide and enables home buyers to purchase homes where otherwise they would not have qualified.  Mortgage rates are at a 18 month low and conventional mortgage rates have dropped as low as 3.75% last week.  With the combination of loosening of lenders loosen lending overlays and an all time low on mortgage rates this year, home buying and refinance mortgage loan applications is expected to sky rocket for the remainder of this year into all of 2015.

Lenders Loosen Lending Overlays

Mortgage lenders loosen lending overlays are guidelines that a mortgage lender imposes on top of the minimum FHA and Fannie Mae Guidelines. For example, to qualify for a 3.5% down payment FHA loan, FHA minimum credit score requirements is that the mortgage loan applicant have a 580 FICO credit score.  However, a particular mortgage lender may set a lending overlay of a minimum credit score of 640 FICO and refuse to take any mortgage loan applicant with credit scores under 640 FICO.  Same with collection accounts.  FHA does not require a mortgage loan applicant to pay off collection accounts with unsatisfied balances.  However, a mortgage lender may require that the mortgage loan applicant pay off any collection accounts with unsatisfied balances and bring it to a zero balance as part of their lending overlays because they might be afraid that the collection account will turn into a judgment.  Majority of mortgage lenders have lending overlays.  However, more and more mortgage lenders are eliminating some of their lending overlays.  I am a mortgage banker and have investors with zero lending overlays.  Not too many mortgage lenders have zero mortgage lending overlays.  However, I expect mortgage lenders loosening their lending overlays more and more as time goes on.

 Credit Score Lending Overlays

As mentioned above, the minimum credit score needed to qualify for a 3.5% down payment home purchase mortgage loan is 580 FICO.  However, most banks and mortgage lenders have lending overlays on FHA loans that require minimum credit scores of 640 FICO.  Many 640 FICO credit score mortgage lenders have loosen their lending overlays to 620 FICO credit scores.  Others have lowered their minimum FICO credit score requirements to 600 FICO.  If your FICO credit scores are lower than 600 FICO and no mortgage lender will take you due to their lending overlays, please contact me at www.gustancho.com .  We have no mortgage lending overlays and just go off the DU FINDINGS or LP FINDINGS.

Debt To Income Ratio Lending Overlays

Besides credit score lending overlays, another popular lending overlays set by mortgage lenders are debt to income ratio overlays.  For FHA loans, the maximum front end debt to income ratios allowed to be approve/eligible per DU FINDINGS is 46.9% and the maximum back end debt to income ratio allowed is 56.9% DTI.  However, majority of mortgage lenders have set a cap on debt to income ratio lending overlays.  Most FHA lenders do not want to see a 45% debt to income ratio and there are some that will allow up to 50% debt to income ratio for back end.  However, more and more mortgage lenders are eliminating the debt to income ratio lending overlays and will just go off DU FINDINGS.  Plaza Mortgage recently removed their debt to income ratio 50% maximum lending overlays and now will just go off DU FINDINGS.  You will find more and more lenders removing their debt to income ratio overlays on FHA LOANS.

Collection Account Lending Overlays

FHA guidelines allow for a mortgage applicant to get a mortgage loan with unsatisfied collection accounts without having them pay for it in full.  However, many mortgage lenders, especially banks and credit unions, require that all collection accounts be paid in full as part of their own internal mortgage lending overlays.  Unfortunately, most mortgage lenders that have lending overlays on collection accounts still do not budge on this lending overlays.  The reason being is because they are afraid a unsatisfied collection account can turn into a judgment.  If you get denied by a mortgage lender due to unpaid collection accounts, please contact me at www.gustancho.com and I will be able to help you because I am a no lending overlays mortgage lender and all I go by is DU FINDINGS.

Mortgage Lenders With No Lending Overlays

If you have gotten denied for a mortgage loan in the past couple of years from your lender due to mortgage lending overlays, you may try them back since many mortgage lenders have loosened their lending overlays.  If you still do not qualify due to their lending overlays, please contact me at www.gustancho.com or at 1-262-716-8151 . The Money Store, www.themoneystore.biz,  is -licensed in most of the 50 states and is a national mortgage lender.

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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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