Mortgage: Lender overlays. There is a great deal of mortgage information out there on: how to get one, what type of programs lenders offer and what interest rates are being offered. All loans are not created equally among all lenders though.
Each lender, be it a banking institution or mortgage broker, has different loan programs but most lenders will work with conventional, FHA & VA loans however what their specific requirements are for qualification above and beyond the loan program will differ. This is where the term overlay comes in.
For example, one lender I have worked with will approve FHA loans with a middle credit score down to 600 and yet another lender requires a minimum 640. FHA does not require a minimum score. In this scenario the lender required minimum score is an overlay.
Lender overlays can be more than just credit score. Sometimes it is debt to income ratios, length of employment, open collections and more.
Shopping for the best loan terms is just as important as seeking out the best loan type. Speaking with multiple lenders can be a good thing but don’t let each of them pull your credit – too many pulls can drop your score!
Before looking for a home the best first step is to figure out what type of financing is best for you and the amount a lender is willing to give. So much emphasis is put on finding the right home before finding the right financing. To set yourself up for the best chance of success financing should come first.
© Danielle Sharp | Sharp Homes Realty | firstname.lastname@example.org | Mortgage: Lender Overlays