HUD Agency Guidelines Versus Lender Overlays On FHA Loans

by Gustan Cho

This ARTICLE On HUD Agency Guidelines Versus Lender Overlays On FHA Loans Was PUBLISHED On October 6th, 2020

HUD Agency Guidelines Versus Lender Overlays On FHA Loans:

  • There are two different types of lending guidelines when it comes to FHA loans
  • All lenders who are originating and funding FHA loans need to make sure their borrowers meet the minimum HUD Agency Mortgage Guidelines
  • HUD is the parent of FHA
  • HUD is the government agency that sets all of the minimum agency guidelines on FHA loans
  • Lenders who do not meet the minimum HUD Agency Guidelines on the FHA loans they process, underwrite, and fund are not insured in the event the borrower defaults and forecloses on their FHA loan
  • The second lending guidelines are optional depending on the lender
  • Lenders can opt to have higher lending requirements that is above and beyond the minimum HUD Agency Mortgage Guidelines
  • For example, the minimum credit score requirement to qualify for a 3.5% down payment FHA home purchase loan is 580 FICO
  • However, a lender may require a minimum credit score requirement of 640 FICO even though HUD’s minimum credit score requirement is 580 FICO
  • This higher credit score requirement is called a lender overlay on credit score
  • Lenders can have lender overlays on just about anything
  • It is not illegal for a mortgage company to have higher lending standards that is above and beyond the minimum guidelines required by HUD
  • Most lenders have lender overlays
  • However, Capital Lending Network, Inc. is one of the very few national mortgage companies with no lender overlays on FHA Loans

In this article, we will discuss and cover HUD Agency Guidelines Versus Lender Overlays On FHA Loans.

HUD Agency Guidelines Versus Lender Overlays: Minimum HUD Guidelines On FHA Loans

In this paragraph, we will discuss the how not all lenders have the same lending requirements on FHA loans.

  • As long as you meet the minimum lending HUD Agency Mortgage Guidelines, you meet all of the minimum guidelines to qualify for an FHA loan
  • Not all lenders have the same FHA lending requirements
  • For borrowers with less than perfect credit, you need to research and choose a lender like Capital Lending Network, Inc. that has zero lender overlays on FHA loans
  • Over 90% of the lenders will have overlays on FHA loans
  • Not all lenders have the same FHA lending requirements
  • Some lenders may have tougher lender overlays than other lenders
  • Just because one lender says you do not qualify at their lending institution does not mean you do not qualify at a different lender

Over 75% of our borrowers at Capital Lending Network, Inc. are folks who either have gotten a last minute mortgage denial or could not qualify due to lender overlays.

Minimum HUD Agency Mortgage Guidelines On FHA Loans

If you meet the mortgage guidelines listed below, you will qualify for an FHA loan with Capital Lending Network, Inc. as long as you get an approve/eligible per automated underwriting system (AUS).

  • To qualify for a 3.5% down payment home purchase FHA loan, HUD requires a minimum of a 580 credit score
  • Borrowers can qualify for an FHA loan with credit scores lower than 580 FICO and down to 500
  • However, per HUD Guidelines, any borrower with under 580 credit scores, you need a 10 down payment versus 3.5% down payment
  • Timely payments in the past 12 months is key in getting an approve/eligible per automated underwriting system
  • Outstanding collections and/or charged-off accounts do not have to be paid to qualify for an FHA loan
  • There is a two year waiting period after Chapter 7 Bankruptcy discharged date to qualify for an FHA loan
  • There is a three year waiting period after foreclosure, deed in lieu of foreclosure, short sale to qualify for an FHA loan
  • Borrowers in Chapter 13 Bankruptcy repayment plan are eligible to qualify for an FHA loan after being in the repayment plan for at least twelve months
  • Timely payments during the repayment plan is required as well as Trustee approval
  • The Chapter 13 Bankruptcy does not have to be discharged
  • Needs to be a manual underwrite
  • There is no waiting period after Chapter 13 Bankruptcy discharged date to qualify for an FHA loan
  • If Chapter 13 Bankruptcy has been seasoned for less than two years, it needs to be a manual underwrite

Capital Lending Network, Inc. are experts in both FHA and VA manual underwriting.

You may also like

Leave a Comment