The Difference Between VA Agency Guidelines and Lender Overlays On VA Home Loans

This ARTICLE Is About The VA Agency Guidelines Versus Lender Overlays On VA Home Loans

In this article, we will cover the VA Agency Guidelines Versus Lender Overlays On VA Home Loans Explained. Many of our viewers at Capital Lending Network, Inc. (CLN) come to us and ask us what are the exact mortgage guidelines on VA loans. Many borrowers are often confused on how the mortgage process works. Borrowers go to lender to lender and get conflicting reports about the lender’s VA lending requirements. They are told the minimum credit score requirements are 640 from one lender while another lender says their minimum credit score requirements is 660 FICO. Then they go to the VA government website and find out there is no credit score requirements on VA loans. So who is right.

Lender Overlays On VA Loans Explained

Why do all of these lenders have different lending guidelines on VA loans. This is one of the most asked questions at CLN Mortgage Group. The answer is there is no minimum credit requirements on VA loans. Then why do lenders have their own credit score requirements?  This is because of lender overlays by the individual mortgage lender. Most mortgage lenders have lender overlays which means individual mortgage guidelines of their own that is above and beyond the minimum VA Agency Guidelines.

Do All Lenders Have The Same Lending Requirements On VA Loans

Do All Lenders Have The Same Lending Requirements On VA Loans

All lenders need to meet the minimum VA Agency Guidelines set forth by the Veterans Administration (VA). However, lenders are allowed to have higher lending requirements that is above and beyond the minimum agency guidelines set by the Veterans Administration. These higher lending guidelines of the individual lender are called lender overlays. Lenders can set overlays on just about anything. It is not illegal for lenders to set higher lending guidelines that is above and beyond the minimum VA Agency Guidelines. Most lenders have overlays on government and conventional loans. However, Capital Lending Network, Inc. is a national mortgage company licensed in multiple states with no lender overlays on VA loans. CLN Mortgage Group has a national reputation of not having any lender overlays on government and conventional loans.

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

VA Agency Guidelines Versus Lender Overlays: What Are Lender Overlays On VA Mortgages

As mentioned in the above paragraph, most lenders have lender overlays not just on VA loans but other government and conventional loans. Most lenders have lender overlays. However, many lenders will think it is just too risky to just go off the minimum VA Agency Guidelines. Therefore, they add additional lending guidelines of their own that surpass the minimum agency VA guidelines. All lenders need to make sure their borrowers meet the minimum VA guidelines. However, they can set additional higher lender requirements that surpass the minimum agency guidelines. There are lenders like Capital Lending Network, Inc. that has zero lender overlays. CLN Mortgage Group will just go off the automated findings of the automated underwriting system (AUS).

Capital Lending Network, Inc. has no other lending requirements above and beyond the minimum agency guidelines of the Veterans Administration.

Understanding How VA Guidelines Work

How VA Guidelines Work

It is important for borrowers to know the basic agency guidelines set by the Veterans Administration. In the event if a lender may tell you that you do not qualify, by knowing the agency VA guidelines you will know that you meet the agency guidelines but do not qualify for a VA loan with this particular lender due to their lender overlays. Borrowers need to realize that most lenders have lender overlays on VA loans. If a lender has a minimum credit score and/or debt to income ratio requirement, you know right off the bat the lender has lender overlays. This is because there are no minimum credit score requirements or debt to income ratio caps on VA loans. Anyone with impeccable credit, high credit scores, lower debt to income ratios, and no outstanding collections and/or charged-off accounts can qualify for a VA loan anywhere. The lender can have all the lender overlays they want and you will still qualify. For borrowers with prior bad credit and/or less than perfect credit or lower credit scores may need to qualify for a VA loan with a lender with no lender overlays like Capital Lending Network, Inc.

Minimum VA Agency Guidelines On VA Loans

The Veterans Administration (VA) have much easier agency mortgage guidelines than any other home mortgage program.

Here are the minimum VA Agency Mortgage Guidelines on VA Loans:

  • There is no minimum credit score requirements on VA loans as long as you get an approve/eligible per automated underwriting system (AUS)
  • There is no maximum debt to income ratio as long as you get an approve/eligible per AUS
  • Lenders offer 100% financing with no down payment required
  • Most homebuyers do not have to worry about covering closing costs
  • Closing costs are normally covered with sellers concessions and/or lender credit
  • There is no mortgage insurance required on VA loans
  • There is no maximum loan limit on VA loans
  • There is a two year waiting period after Chapter 7 Bankruptcy discharged date to qualify for a VA loan
  • There is a two year waiting period after foreclosure, deed in lieu of foreclosure, short sale to qualify for a VA loan
  • Borrowers in Chapter 13 Bankruptcy repayment plan can qualify for a VA loan after being in the repayment plan for 12 months and bankruptcy trustee approval
  • Needs to be a manual underwrite and no late payments during the repayment period
  • There is no waiting period after Chapter 13 Bankruptcy discharged date
  • Any Chapter 13 Bankruptcy discharge that has not been seasoned for at least 24 months needs to be manually underwritten
  • Outstanding collections and charged off accounts do not have to be paid off to qualify for a VA loan

If you meet the above minimum VA agency mortgage guidelines and are told you do not qualify with a lender, give us a call at Capital Lending Network, Inc. at 800-900-8569 or text us for a faster response. Or email us at contact@capitallendingnetwork.com. The team at Capital Lending Network, Inc. is available 7 days a week, on evenings, weekends, and holidays.


Gustan Cho is a senior mortgage expert and National Managing Director, providing direct-to-consumer advice at NEXA Mortgage LLC. We are a mortgage brokers licensed in multiple states. We are experts in FHA Loans, VA Loans, USDA Loans, Conventional Loans, FHA 203k Loans, Reverse Mortgages Jumbo Mortgages, Non-QM mortgages, Bank Statement Mortgage Loans for self employed borrowers, and alternative financing.

8 Comments

In honor of all those who have served our country past and present, Capital Lending Network, Inc. will be closed on Wednesday, November 11, 2020, in observance of Veterans Day. CLN Mortgage Group will reopen on Thursday, November 12, for normal business hours.

We wish you a safe and enjoyable holiday.

I would like to use my VA loan to purchase a house in Fairburn, Georgia. My middle score is 595. My wife’s middle score is 639. Together on the low end our annual income is $90000. I read this article and from the content on this article, I qualify for a VA loan with Capital Lending Network. I will send my contact information via email. Hope you can help us.

Hello,
I am looking for a loan, i have properties that i’m interested in making offers on, my median score is pulling at 585 or so, if you think i may qualify please let me know

I am a Veteran. My credit is blemished, and I have been working on raising my score. I would like to use my VA loan which is no money down and no PMI. Can you help me?! I am so tired of renting my tiny apartment.

In search of a mortgage company that can do a manual underwritting VA loan for a house in New York State. My husband is the Vet with a letter of approval for a VA loan and a credit score of 0. We had an pre-approval letter issued back in September 2019 from a mortgage lender. Fell through because of the “must occupy” clause but now have a letter of job offer to back that up. Message me if you can help. TY Debby

Hello
I currently have a delinquent timeshare. It has not foreclosed as of yet. But has been past due for 3 years. The timeshare company has began process for a deed in lieu buy has since shut down their feeding department due to COVID. Is it possible to still qualify for an FHA Loan? I have no other delinquent accounts.

Can you please explain the appraisal request process for VA? Curious why checks have to be mailed in for VA appraisals to be submitted thru Dawn? Every VA I’ve done so far has been done thru the credit card auth form (with Ami). Clients mailing a check will delay the process. Has there been a process change or is this just something that Dawn prefers?

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