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What are mortgage lender overlays?
HUD, FANNIE MAE, FREDDIE MAC, USDA, VA all have their own minimum mortgage lending guidelines. HUD, the United States Department of Housing and Urban Development, is the parent of the Federal Housing Administration, FHA. For example, FHA has minimum lending guidelines with regards to credit scores, debt to income ratios, waiting periods after bankruptcy, foreclosure, deed in lieu of foreclosures, and short sale as well as guidelines on collection accounts. Mortgage lenders also have their own guidelines that can exceed the minimum required by FHA. These additional mortgage lending guidelines imposed by private mortgage lenders is called mortgage lender overlays. FHA minimum credit score guidelines to qualify for a 3.5% down payment home purchase loan is 580 FICO. However, a mortgage lender can have their own mortgage lender overlays where the minimum credit scores they can require is 640 FICO and any mortgage loan applicant that applies with credit scores under 640 FICO will automatically not qualify for a FHA loan with their institution. Almost all banks have mortgage lender overlays. As long as you meet the minimum federal mortgage lending guidelines, you will get a mortgage loan with a mortgage lender that has no mortgage lender overlays. Just Google mortgage lender with no mortgage lender overlays and you will see hundreds of mortgage lenders who do not have mortgage lender overlays.

If you get told that you do not qualify for a FHA loan by a certain lender and you know for a fact that you qualify because you meet all FHA lending guidelines with regards to credit, debt to income ratios, and waiting period requirements after bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale, ask the mortgage lender why you do not qualify with them. Chances are that you do not qualify due to their mortgage lender overlays and not because you do not meet FHA mortgage lending guidelines. Here is a detailed article about FHA mortgage lender overlays.



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