Lender overlays are additional requirements put in place by a lender above and beyond those set by Fannie Mae, Freddie Mac, VA, USDA, and FHA. Essentially lender overlays make the mortgage approval process more restrictive for borrowers, but at the same time makes borrowing and the mortgage market safer for all. These overlays can come in the form of lower debt to income ratios, higher credit score requirements, larger down payments, lower loan limits and higher income thresholds. Some may see these lender overlays as a threat to their approval, however borrowers should see them as greater protection not only for the lender but themselves. Lenders do these as a risk mitigation tool to further insure the loans they sell to Fannie Mae and Freddie Mac don’t end up needing to be purchased back for faulty underwriting. I’m Stewart Brown, a licensed Mortgage Loan Originator in Palm Springs, California here to simply topics in Real Estate and Mortgage Lending. Please, like, share, follow and subscribe!
