Today I was speaking about lender overlays, with a homeowner who wanted to understand why, when they called different mortgage companies, their FICO requirements were all different. By definition, a mortgage overlay is a set of restrictions that a lender imposes beyond what the actual loan program’s guidelines are. A lender may tell you that in order to qualify for an FHA loan, you’ll need a FICO score above 580 – but if you look at the guidelines set forth on the Department of Housing and Urban Development (HUD), ones credit score can be between 500-579 if the loan to value ratio is less than 90%. It is difficult for homeowners, or future homeowners, to get clear information from mortgage companies about all of their options; when many only care about what options they can provide, and not all the options that exist.
For FHA loans, I like to consult the HUD website for the official guidelines, found here: https://www.hud.gov/sites/documents/4155-1_4_SECA.PDF
In general, the HUD website offers a LOT of resources to consumers, free of any advertisements or fluff. I like to use their resource page, for getting up to date information: https://www.hud.gov/resources
If you notice that the requirements that a lender is imposing go beyond what the actual loan’s limits are; feel free to reach out to a few other companies. It is helpful to be informed, to know your options before inquiring about a loan – so that you can find a company that meets your needs, and can help you meet your goals.