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What Is An Underwriting Guideline Overlay?
Why does it sometimes seem that underwriting guidelines vary from mortgage company to mortgage company? Well, it is because, sometimes they do. Each agency (Fannie Mae, Freddie Mac, FHA, VA, USDA) sets the minimum guidelines for the approval of a mortgage that they will back if it defaults. An overlay is when a mortgage lender adds an additional restriction to their guidelines. One huge misconception is that
There are many types of overlays. Some of the most common include:
When an Underwriter makes a condition that someone doesn't agree with, they are not just doing it because they want to. There is a valid reason behind it.
With a mortgage transaction, everyone is focused on the closing. Of course they are, since without a closing, keys don't change hands and real estate agents do not get paid. It's easy to get upset when you seeing someone standing in the way of that goal. What most everyone forgets is what happens after the closing.
If the buyer's loan ever defaults, it's the mortgage lender who will incur the financial losses. No one comes back to the seller demanding they take over the mortgage of the home. Likewise, no one comes back to the real estate agents demanding that ... more
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