Mortgage Loan Programs
Majority of wholesale mortgage lenders have their own internal overlays. There are a few wholesale lenders that claim they have zero overlays, however, completely zero overlays are non existent. Here is a complete list I have of overlays that wholesale mortgage lenders who claim they have zero overlays still question. I have had some success getting around things like maximum debt to income rations, DTI, and some of the rental verification stuff with supporting documentation such as letters of explanations.
Mortgage Lender Overlays
- DU approval must reflect a maximum debt to income ratio, DTI, of 56.9%. Exceptions to exceed will be reviewed and made on case-by-case basis (I haven’t seen an approve eligible over 56.9% DTI denied yet due to debt to income ratios). FHA and Fannie Mae can approve maximium debt to income ratios of up to 56.9%. Wholesale mortgage lenders that claim no internal overlays need to honor their own lending guideline rate sheets of 56.9%, however, every deal that I submit with such high debt to income ratios gets kicked back by underwriting requesting a letter of explanation on how they intend on paying their mortgage and monthly payments with no hardship.
- Submission package must provide evidence of documented strengths to offset any of borrowers deficiencies (This helps me give me ammo to potentially get around any hurdles).
- Verification of rent by providing 12 months canceled checks or management VOR. If borrower has lived with a family member rent free or paid cash for rent, borrower to provide a signed budget letter. (I have had some success when documenting less than 12 months on this provided we have strong LOE’s budget letter etc).
- Follow DU for acceptable credit documentation.
- Collections/Chargeoffs less than 24 months and greater than $5000 will be reviewed on case-by-case basis and requirement for payoff is at underwriter’s discretion.
- Non occupant co-borrowers or co-signers are permitted as long as they are immediate family members; proof of relationship required. Other blood relatives (aunts, uncles, cousins, etc) will be permitted and the occupant borrower DTI cannot exceed 50%.
- Borrower income derived solely from commissions must have 3 months PITI reserves over and above the required investment.
- Borrowers that are currently in payment arrangement with IRS have an established payment arrangement in place for 3 months and provide evidence of payments made.
Mortgage Loan Programs Change All The Time With Very Little Notice
There are many wholesale mortgage lenders that change their internal overlays mortgage loan programs guidelines with little notice. I have a wholesale mortgage lender who stated that they had no overlays and as long as the borrower had an approved eligible from Fannie Mae’s Automated Underwriting System, the deal will get done. During the underwriting process, the mortgage application got suspended because all of a sudden they wholesale mortgage lender implemented rental verification overlays. My borrowers could not provide rental verification because the home they were currently living in was under foreclosure. The home was under the wife’s name and not the husband, my borrower. I have contacted underwriting and my rep and had to discuss and contest their request. Ultimately, the underwriting department decided on my favor and go ahead and approve the mortgage loan without requiring rental verification.
Do Not Procrastinate And Get A Clear To Close As Soon As Possible On Special Mortgage Loan Programs
If your mortgage loan originator offers you special mortgage loan programs such as no overlay mortgage loan programs where it benefits you like you do not have to pay off open collections, 580 FICO credit scores, high debt to income ratios, I strongly recommend that you aggressively work in getting a clear to close and not procrastinate in submitting your required documents.