Many people may not understand the difference between an FHA underwriting guideline and a lender overlay, but I am going to try to explain it here, because there are some very interesting things happening in this arena currently. First of all, where a lot of people get confused is what is an FHA Insured Loan? Basically, it means that FHA insures that the loan will perform, it does not mean that FHA is loaning the money for the home loan and this is where the difficulty begins.

For instance, FHA does not have a minimum credit score requirement to be eligible for FHA insured financing. However, the lender making the loan may have a minimum credit score requirement, in fact most of them are set at 620 or higher. This is a prime example of the “Golden Rule,” he with the gold makes the rule. In other words, the lender is using their money for the home loan and therefore they set the rules you must meet to get the loan from them. This is where overlays come in. The lender cannot make their rules any less stringent than FHA’s, but the can make them any more stringent as they want.

Another example is manufactured homes. FHA allows manufactured home for collateral on home loans, but the majority of lender will not accept manufactured homes no matter the year, condition or value. FHA does have some age and foundation requirements that will take some of the homes out of the running, but the ability to get an FHA loan on a manufactured home is extremely limited.

So, where does that leave us today? Just a short time ago, I received notice from one of the lenders that I work with that they will not longer accept manufactured homes. That means that, currently, for an FHA loan, only one wholesale lender that I work with will accept manufactured homes and that could change at any time. I also only have one wholesale lender that will accept credit scores below 620, but that could change also and they won’t accept a manufactured home with a lower than 620 credit score. The market is changing and will continue to change.

Anyone that falls into these categories need to be working with a lender that has their finger on the pulse of the continually changing lending environment.  If you need someone like that, please contact me today and let’s get you going on your new home purchase. As of today, and this hour, I can still submit loans for manufactured homes and credit scores below 620. Who knows how long that will last. You can reach me at 541-342-7576/541-221-3455 or by e-mail I am here to help.

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