Capital Lending Network, Inc. has a national reputation for not having any lender overlays on government and conventional loans.
- There are three different government loan programs: FHA, VA, USDA
- Conventional Loans are commonly referred to as conforming loans
- Conventional loans are referred to as conforming loans
- This is because they need to conform to Fannie Mae and/or Freddie Mac Agency Mortgage Guidelines
- Fannie Mae and Freddie Mac will not purchase conventional loans on the secondary mortgage market if the loans do not conform to Fannie and/or Freddie
Lenders can have higher lending requirements that is above and beyond government and/or conventional lending guidelines called lender overlays. Most lenders do have higher lending requirements that is above and beyond the minimum agency guidelines of HUD, VA, USDA, Fannie Mae, Freddie Mac. Capital Lending Network, Inc. has a network of wholesale investors with no lender overlays on government and conventional loans. CLN will just go off the automated underwriting system (AUS) findings and has no other lender overlays.
Agency Mortgage Guidelines Versus Lender Overlays
All lenders need to make sure their borrowers meet the minimum agency mortgage guidelines on government loans if they want the loans to be backed by the government agency.
- Lenders originate and fund government loans due to the lower risk factors due to the government guarantee
- If a borrower defaults and/or forecloses on a government loan, the government agency will partially guarantee the loss sustained by the lender if and only if all agency guidelines were followed
- However, if the lender did not follow the government agency guidelines, the loan will not be insured by the government agency
- To avoid potential borrower default, most lenders will have lender overlays on FHA, VA, USDA, and Conventional loans
- However, Capital Lending Network, Inc. does not have any lender overlays on government and conventional loans
- CLN will just go off the findings of the automated underwriting system (AUS)
In the following paragraphs, we will list the links to HUD, VA, USDA, FANNIE MAE, and FREDDIE MAC.
HUD 4000.1 FHA Handbook On FHA Loans
HUD is the parent of FHA. HUD is the government agency that sets the mortgage guidelines on FHA Loans.
- HUD’s mission is to promote home ownership and affordable housing to hard working Americans
- FHA loans is one of the most popular home mortgage programs in the nation
- HUD sets lenient agency guidelines so homebuyers with credit scores down to 580 FICO and less than perfect credit can qualify for an FHA loan with 3.5% down payment
- HUD allows borrowers with under 580 credit scores and down to 500 FICO qualify for an FHA loan
- However, per HUD Agency Guidelines, any borrower with under 580 credit scores and down to 500 FICO will need 10% versus a 3.5% down payment
- Not all lenders have the same lending requirements on FHA loans
- Most lenders have lender overlays on FHA loans
- For example, most lenders will not approve borrowers with under 620 credit scores even though HUD allows borrowers with a 580 credit score to qualify for an FHA loan with a 3.5% down payment
- Lenders can have just about any kind of lender overlays on FHA loans
- Capital Lending Network, Inc. has zero overlays on FHA loans
- CLN just go off the HUD Agency Guidelines on FHA loans
- We just go off the agency HUD Guidelines on the HUD 4000.1 FHA Handbook on FHA loans
VA Agency Mortgage Guidelines On VA Loans
VA loans is the best home mortgage program in the U.S.
- Only eligible active and/or retired members of the U.S. Armed Forces with a certificate of eligibility (COE) are eligible to qualify for VA loans
- Lenders can offer 100% financing with no mortgage insurance required at the lowest rates due to the government guarantee on VA loans
- There are no minimum credit score requirements on VA loans as long as the borrower can get an approve/eligible per automated underwriting system (AUS)
- VA loans do not require any down payment on a home purchase
- Homebuyers can purchase a home with zero money out of pocket with a VA loan
- Lenders will offer 100% financing and the homebuyer can cover closing costs with either a seller’s concession or a lender credit or a combination of both
- There is no maximum debt to income ratio caps on VA loans as long as the borrower can get an approve/eligible per automated underwriting system
- There is no maximum loan limit on VA loans
- Capital Lending Network, Inc. is a national mortgage company licensed in multiple states with no lender overlays on VA loans
- CLN only goes by the automated underwriting system findings
- A large percentage of our VA loans at Capital Lending Network, Inc. are manual underwrites
- CLN has a national five-star reputation for not having any lender overlays on VA loans
USDA Agency Mortgage Guidelines On USDA Loans
USDA loans are very popular in rural and suburban areas.
- Homebuyers do not need any down payment on USDA loans
- Lenders offer 100% financing on USDA loans
- Home sellers can contribute up to 6% in seller’s concessions to homebuyers to cover the buyer’s closing costs
- Only areas designated by the United States Department of Agriculture are eligible for USDA loans
- To become an eligible borrower for USDA loans, the household income need to meet the parameters set by the U.S. Department of Agriculture
- Homebuyers cannot choose any area that seems rural and expect to be able to qualify for a USDA loans
- The subject property need to sit in an area approved by USDA’s Rural Development department
Here is the link to the USDA Rural Development location eligibility checker page USDA Map
Per USDA’s Rural Development guidelines there are household income caps for the program. RD has segregated these restrictions per county. The income caps include total household income. Not just the persons on the loan but any person that will be residing in the residence. The average income cap for total household income is about 78,200 a year for a one to four person household. Once you have more than 5 persons in the household the income limit goes up dramatically. Areas with higher median area income will have higher limits. Be sure to call us to verify if your income meets the guidelines for the USDA loans program in your area.
Fannie Mae And Freddie Mac Agency Guidelines On Conventional Loans
Fannie Mae and Freddie Mac were created by the U.S. Congress to provide liquidity and stability as well as affordability to the mortgage and housing markets in the United States.
- Fannie Mae and Freddie Mac sets conforming mortgage guidelines for conventional loans
- Conventional loans are originated and funded by mortgage companies, banks, credit unions, and other financial institutions
- Fannie Mae and Freddie Mac purchases mortgages from financial institutions so they can relieve their warehouse lines of credit and originate and fund more loans
This is how Fannie Mae and Freddie Mac provide liquidity to thousands of financial institutions such as mortgage companies, banks, credit unions, and other financial institutions.
Fannie Mae and Freddie Mac either will keep the mortgages they purchase in their portfolios or will packaged them up as mortgage-backed securities (MBS) and sell them on the secondary mortgage bond markets. The purchase by Fannie and Freddie provide lenders liquidity so they can continue originating and funding more home mortgages at low rates and great terms to make homeownership affordable to all Americans.
Fannie Mae was created in 1938 by the U.S. government to oversea the housing and mortgage markets in the U.S.
The role of Fannie Mae was to make sure Americans had accessibility to affordable housing and mortgages at reasonable rates and supply and lenders had liquidity in the marketplace
Freddie Mac was created by the U.S. Congress in 1970 to bring competition to Fannie Mae.
It was launched as a private company to assure Fannie Mae will not monopolize the mortgage markets in the United States.
Today, both Fannie Mae and Freddie Mac are shareholder-owned companies that operates under Congressional Charter.
Here is the link to Fannie Mae Agency Mortgage Guidelines
Here is the link to Freddie Mac Agency Mortgage Guidelines