Mortgage Secret Lenders Don't Want You to Know
Lenders sometimes make up their OWN RULES, and you wont know which lender to use to fit your situation.
Its called the "OVERLAY” which is an additional requirement (or set of requirements) on top of what Fannie Mae, Freddie Mac, Ginnie Mae/FHA and VA will allow before giving you a loan.
Fannie Mae and Freddie Mac create the guidelines for who gets approve for a mortgage. These are the baseline requirements that homebuyers must meet in order to purchase a mortgage on the secondary market (i.e., through a bank or credit union). These requirements include things like your credit score and employment history, which help lenders ensure that you are a reliable borrower.
This is where overlays come into play and can make things tricky for some homebuyers. Overlays are additional guidelines that large and small lenders alike add to Fannie and Freddie’s existing guidelines in order to close loans with them. They do so to mitigate risk. Ultimately, individual banks and lenders are the ones issuing the loans, so they want to minimize the chances that anything will compromise repayment of the loan by imposing their own rules on top of Fannie and Freddie’s guidelines.
Overlays can include anything from credit score (most common), to max loan-to-value, to max debt-to-income ratio, and much more. The more overlays that a lender has, the more difficult it is to get approved for a mortgage.
When working with a lender, it is a good idea to find out if they sell their loans directly to Fannie/Freddie or if they sell the loans to some of the larger banks out there. Guaranteed Rate can sell their loans directly to Fannie/Freddie/Ginnie, so we don't have overlays. If other lenders sell loans to larger banks, it can be harder to get approved. If you apply for a loan with a bank directly, you will most likely have to deal with their overlays.
As a Buyer or Realtor, having a lender that has the ability to underwrite a loan to a specific investor will often allow the highly competitive rates and costs. Guaranteed Rates has access to many specialty investors. But, you also want the same lender to be able to sell directly to Fannie Mae, Freddie Mac, and Ginnie Mae. It means that if your loan does not “Fit in the Box” for other investors, that your loan can be underwritten WITHOUT any overlays. Guaranteed Rate can do just that.
If you’re in the market for a new home, I would love to speak with you about your options for home ownership. Email me at mdeitrich@rate.com or by phone at (972) 6782-3246.
Marcel Deitrich VP/Branch Manager Guaranteed Rate NMLS#231135 Rate.com/marceldeitrich