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Lender Overlays 101


Lender Overlays 101: Minimum Requirements Does NOT Mean Approval

In this article about Lender Overlays 101, we will go over the basics regarding Lender Overlays, what they are, and how they can affect you in getting your new home mortgage.  To start with the definition, Mortgage Lender Overlays in its simplest form are additional mortgage requirements put in place by mortgage lenders that are in additional to the minimum requirements of a mortgage loan program.  Just so you are aware, mortgage lenders are well within their rights to impose additional requirements that borrowers must abide by.  You have to think from their standpoint, they are taking on less risk with the stricter requirements imposed before issuing an approval for a loan.

Lender Overlays 101: Quick Example Credit Score

Let’s take an example of this and it would be an FHA Loan Program.  FHA is known for some of the most lenient minimum requirements around which is why they are the most popular loan choice amongst borrowers in the United States.  If you just look at the FHA Loan requirements you will see that there is a minimum FICO credit score of 580 needed for a 3.5% down payment loan or you can have a FICO credit score of 500-579 and get a loan with a 10% down payment.  You may think this is a great option for you to become a homeowner, but you may run into lenders along the way who will require a minimum FICO credit score of 640 in order for them to loan to you.  If you have run into this, you have encountered a mortgage lender overlay.  A lot of lenders will put these into play and it will be up to you to find the lender that can lend to you using only the minimum requirements.  The good news is if you are reading this article, you are in luck and here as we have NO lender overlays and will make our loans to the minimum loan program requirements.  Reach out to me ASAP to get your loan started immediately at 888-900-1020 or email me at

Lender Overlays 101: Other Overlays

As you can see in my first example from Lender Overlays 101, one of the main lender overlays that is used is the FICO credit score overlay.  Now this isn’t the only lender overlay that is out there.  There is also a debt to income ratio overlay that a lot of lenders will put into place.  Going back to the FHA Loan requirements, you can have a 56.9% debt to income ratio if you have a FICO credit score of 620.  Now this may be great for you, but you may find out when you get into the pre-approval process with a lender that they are only going to allow a 45% debt to income ratio which is over 10% less debt than what you had originally thought.  In most cases there is no way you are going to be able to pay down your debt to approved levels, so this lender will have no choice but to deny your loan application.

Lender Overlays 101: Conclusion

Hopefully my Lender Overlays 101 is a beginner guide to understanding mortgage lender overlays and how they can affect your loan approval process.  There are a lot more lender overlays that are used and I will go into those in an additional article shortly.  However, if you have run into these overlays recently, please reach out to me as I don’t deal with lender overlays and can get you approved with the minimum requirements.  Call me today at 888-900-1020, email at, or visit for more information and an application.

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