What is an underwriting overlay?
• Fannie Mae, Freddie Mac, FHA, and VA have underwriting guidelines that all lenders must follow if the loan is going to be sold to, insured by, or guaranteed by them
• Lenders are allowed to add their own, more restrictive underwriting guidelines on top of these guidelines
• The additional guidelines are called underwriting overlays
How do these overlays effect the consumer?
If a consumer falls into the gap where they would qualify by the agency guidelines but their loan may still be denied if the lender they are working with is confined to the restricted to the investor overlays.
For example: Someone with a 600 credit score looking for an FHA loan will be told by most lenders that a 640 credit score is required. However, FHA does not have this restriction. The restriction is coming from the investor overlay.
If you or you know of someone that is interested in learning more about these types of loans and to see if you will qualify don’t hesitate to contact Doug!
Contact Information:
Doug Haldeman (NMLS#298419)
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