Getting a mortgage approved can depend on the lender with which you apply. One mortgage lender’s denial is another’s strong approval.
It’s because of Investor overlays; and, when a mortgage loan gets denied, it’s good sense for borrowers to re-apply for that loan somewhere else.
Investor overlays are an additional set of mortgage qualification standards imposed by a lender, beyond what’s a mortgage program’s official guidelines require.
Examples of investor overlays include:
- Raising minimum credit score requirements on a loan by twenty points
- Reducing a borrower’s debt-to-income ratio by a certain number of percentage points
- Increasing a home buyer’s waiting period after a short sale or foreclosure event
Investor overlays are especially common with FHA loans.
According to FHA loan guidelines, a home buyer can get approved for an FHA mortgage with a credit score of at least 500. But, finding a lender that allows a five-hundred score can be a challenge.
Mortgage lenders tend to enforce an FHA credit score overlay that raises minimum FICO requirements as high as 660. Loans with credit scores below that are denied at the point of application.
If that’s you, don’t stop looking for that FHA-backed loan. Overlays vary between lenders. You might get approved somewhere else.
Government data shows that 1-in-5 mortgage approvals are made after an initial mortgage turndown. Don’t let a denial set you back.
Are you a first time home buyer?
Let us know if you’ve done this before - whether you’re a seasoned pro or buying for the first time. We’ll share the perfect information with you as you need it.
An insurance claim is an official request you make to an insurance company, asking to get paid for damages. Insurance claims can be made for any reason that’s a part of your insurance policy. When you have homeowners insurance, you can make an insurance claim after a fire in your home; after there’s been theft […]