What Are Overlays?

Today I wanted to discuss and define overlays.

Every lender has rules around what the loan will be. For example, and FHA has credit score rules, debt to income ratio rules, and so on. Conventional and portfolio are the same and each lender has their own. FHA, VA, Conventional, Freddie Mac or Fannie Mae are all national loans that are funded by the government. With these they all have the same exact rules, but depending on what loan officer, loan company, broker, or credit union you use to get your loan they might have additional rules. These additional rules are what we refer to as overlays.

The rules for FHA and VA have not changed in their credentials, but they have changed at the lender/broker level. This means that additional overlays have been put in place to protect the investors for that credit union, broker, or third-party service. It is very important right now if you are buying a house to make sure that you have double checked the numbers with your current loan officer to make sure that nothing has changed since you were approved recently. Things are constantly changing in the market, and it is important to make sure that you are staying up to date. This is especially true if you are a seller accepting an offer to know that your buyer is qualified for more than the loan amount, and make sure that their credit score if credit overlays change at all will still be acceptable.

If you are looking to buy or sell, please reach out to me, I would love to be a resource for you in your home buying or selling process.

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