VA Overlays Versus Agency Guidelines on VA Home Loans
In this blog, we will cover and explain VA overlays imposed by mortgage lenders on VA home loans. VA loans are the best mortgage loan program in the United States. No other owner-occupant primary home loans come close to the benefits of VA loans. Private lenders offer VA loans at 100% financing where no down payment is required by the homebuyer.
There is no annual mortgage insurance at competitive mortgage rates. There is a one-time VA funding fee that is rolled into the balance of the VA loan. VA loans have no maximum loan limit. The Veterans Administration is the federal agency administering VA loans.
The Role of The Veterans Administration on VA Home Loans
The VA is not a mortgage lender nor does it have any part in originating, funding, or servicing VA loans. The role of the Veterans Administration is to act as the mortgage insurance agency for VA loans. What this means is when homeowners default on VA loans, the Veterans Administration partially insures the loss of private lenders.
Due to this VA loan guarantee, private lenders are more than eager to aggressively offer VA loans to eligible active-duty, retired, and eligible spouses of eligible deceased veterans with no down payment, no mortgage insurance, competitive rates, and no maximum loan limit.
What Are The Benefits of VA Home Loans?
The Veterans Administration has created VA loans to reward veterans who have served our country with the opportunity to become homeowners with no money down at incredibly low rates with very lenient guidelines. Not every veteran is eligible for VA loans.
VA Agency Mortgage Guidelines Versus VA Overlays
There are two sets of VA lending requirements. All mortgage lenders need to have borrowers meet the minimum VA agency mortgage guidelines. Lenders need to follow the minimum VA agency guidelines if they want the VA loans they originate and fund to be insurable in the event of default.
If a borrower gets approved and funded but does not meet the minimum agency guidelines, the Veterans Administration will not insure the defaulted VA loan. In order for the Veterans Administration to insure lenders against the loss of borrowers that default on VA loans, the lender needs to make sure the borrower has met at least the minimum VA guidelines of the Veterans Administration. Lenders can have higher lending requirements that are above the minimum VA agency guidelines of the Veterans Administration called VA overlays.
What Are The Minimum VA Agency Guidelines on VA Home Loans
The Veterans Administration has very lenient mortgage guidelines for eligible veterans on VA loans. Below are the minimum agency guidelines on VA loans:
- There are no minimum credit score requirements on VA loans
- Borrowers can get approved for VA loans with credit scores down to 500 FICO
- There is no maximum debt-to-income ratio on VA home loans as long as the borrower gets an approve/eligible per automated underwriting system (AUS)
- Borrowers can get an approve/eligible per automated underwriting system on VA loans with up to a 65% debt-to-income ratio as long as they have strong residual income
- Outstanding collections and charged-off accounts do not have to be paid to qualify for VA loans
- There is a two-year waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale
- Borrowers can qualify for VA loans one year after filing Chapter 13 Bankruptcy with Trustee Approval and a manual underwrite
- The Chapter 13 Bankruptcy does not need to be discharged to be eligible for VA loans during the Chapter 13 Bankruptcy repayment plan
- There are no waiting period requirements after the Chapter 13 Bankruptcy discharge date with a manual underwrite
What Are VA Overlays?
Any lending guidelines required by a mortgage lender that is above and beyond the above minimum VA lending guidelines are called VA overlays. If a lender asks for higher lending requirements above and beyond the above minimum VA lending requirements of the Veterans Administration, you should seek a different lender with no VA overlays. Non-QM Mortgage Brokers has no VA overlays on VA loans.
Best Mortgage Lenders With No VA Overlays on VA Home Loans
Not all mortgage lenders have the same lending requirements on VA loans. All lenders need to meet the minimum agency mortgage guidelines of the Veterans Administration. However, the majority of mortgage companies have VA overlays on VA loans. Just because you do not qualify for a VA loan from one lender does not mean a different lender cannot approve you. Non-QM Mortgage Brokers has no VA overlays on VA loans.
How Often Do VA Loans Get Denied?
Over 80% of our clients at Non-QM Mortgage Brokers are borrowers who could not qualify at other mortgage companies due to lender overlays or because the lender did not have the mortgage program suited for the borrower. If you are looking for the best mortgage lender with no VA overlays, please contact us at Non-QM Mortgage Brokers at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Non-QM Mortgage Brokers is available 7 days a week, evenings, weekends, and holidays.
