Have you ever been told by a lender that there may be an issue with your loan?
Maybe the lender asked for a document, inspection, or repair that seems difficult or even impossible to provide. You may be left wondering, “Why are they asking me for this?” or “Where do I go from here?”
This is where working with a mortgage broker can make a real difference.
A Real-Life Mortgage Example
I recently had an FHA loan where the lender required a foundation repair to be evaluated and completed through an engineering firm. The lender was adamant that an engineering firm had to be involved, even though we had other qualified professionals who could provide the necessary documentation.
This was not necessarily an FHA requirement. It was an additional requirement imposed by that particular lender, which is known as a lender overlay.
Because I am a mortgage broker, my borrower was not stuck with that one lender’s requirements. I was able to submit the loan to another lender that did not have the same overlay.
The second lender was willing to accept documentation from qualified professionals, including a licensed contractor and a home inspector, as long as we could show that the property met the necessary standards and was safe, sound, and structurally secure.
We still satisfied the FHA property requirements. We simply worked with a lender whose internal guidelines better matched the circumstances of the loan.
This is a perfect example of the flexibility a mortgage broker can offer. The answer was not to ignore an important safety concern. The answer was to find a lender that would accept an appropriate and reasonable way to document that the concern had been properly addressed.
No Two Loans Are Exactly the Same
Mortgage loans are not cookie cutter. Even two borrowers applying for the same type of loan can have very different situations.
One borrower may be self-employed. Another may have recently changed jobs. Someone else may be purchasing an investment property, receiving retirement income, or working through a past credit issue.
I offer access to a wide range of financing options, including:
● Conventional loans
● FHA loans
● VA loans
● USDA loans
● Debt service coverage ratio loans
● Bank statement loans
● Other non-qualified mortgage programs
However, having access to different programs is only part of the benefit. I also work with multiple lenders that may interpret or apply certain guidelines differently.
What Are Lender Overlays?
Mortgage programs have basic guidelines established by agencies such as Fannie Mae, Freddie Mac, FHA, VA, and USDA. However, individual lenders can add their own requirements on top of those guidelines. These additional requirements are called lender overlays.
For example, a loan program may allow a certain credit score, debt-to-income ratio, property type, or method of documenting income. One lender may add a more restrictive requirement and decline the loan, even though the borrower meets the program’s basic guidelines.
If you are working directly with that lender, you may have nowhere else to go. You might assume that you do not qualify or that your financing is no longer possible.
As a broker, I may be able to move the loan to another lender that does not have the same overlay. Instead of trying to force your situation into one lender’s box, I can search for an option that better fits the loan we have in front of us.
More Options Mean More Ways to Find a Solution
When a financing issue arises, it does not always mean the loan is over. Sometimes it simply means we need to take another path.
My job is to understand your situation, anticipate potential challenges, and determine which lender and program may be the best fit. If an underwriting issue or lender overlay comes up, I can evaluate other options and, when appropriate, submit the loan to another lender whose guidelines work better for your circumstances.
That flexibility can make the financing process much less stressful. You are not limited to one lender, one underwriter, or one set of internal rules.
If you have been told there is a problem with your financing, or you know your situation is not perfectly cookie cutter, do not give up. Let’s talk about what is happening and explore the options that may be available.
Sometimes the answer is not that you cannot qualify. Sometimes you simply need a lender whose guidelines are a better fit for your situation.