Ever heard of a “lender overlay”? If you’ve been told a loan isn’t possible due to certain guidelines, this might be why.
Lender overlays are extra rules added by specific lenders on top of standard loan requirements. For example, FHA loans may allow debt-to-income (DTI) ratios over 50%, but some lenders cap DTI at 50% — even if FHA doesn’t. Unfortunately, some loan officers may incorrectly tell borrowers that “FHA” doesn’t allow it, when it’s actually their lender’s restriction. This is why a denial from one lender doesn’t mean you won’t qualify elsewhere.
Overlays cover more than just DTI. Lenders may add restrictions on property types, credit history, job tenure, down-payment sources, and more. One example is the myth that FHA won’t allow a home to be resold to a new buyer within 90 days if there’s a 20% increase in price — again, it’s often just one lender’s rule.
As an independent mortgage company, we work with a wide range of lenders to keep these limitations to a minimum, helping find the right match for each borrower’s unique profile.
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