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Do Underwriting Guidelines Vary Between Banks?

By Homesmsp @HomesMSP

The easy answer is yes.  There are underwriting guidelines based on the specific program (FHA, VA, conventional, USDA) that every lender has to follow.  Each program has underwriting manuals that we follow.  From there, many banks have additional guidelines for each program.  They are called "overlay's". 

Many banks have added additional guidelines to the basic requirements that FHA, VA, USDA and Fannie/Freddie have.  The additional overlays may be as simple as credit score requirements that are higher or maybe cash reserves.  We also see a lot of overlays on the HARP programs.  One of the biggest overlays has to do with people wanting to refinance with the HARP loan and they currently have PMI.  Many banks won't allow that, so it has made it more difficult for those homeowners. Some banks require longer wait times after a foreclosures than others.  FHA requires 3 years after a foreclosure, there are some banks that extend that to 7 years.

There is also the actual underwriter that looks at the file.  Because many people may interpret guidelines differently, some underwriters may require more than another underwriter would.  Depending on your loan file, some underwriters may want some additional documentation. 

If you are concerned about your own situation, ask your loan officer to talk to an underwriter and see what is required.  I have access to my underwriters plus the guidelines of the banks we work with.  There may be loans that we have to sell to one bank over another to make sure we meet their guidelines.  If you are questioning something, make sure you talk to your loan officer about it. 


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