When a lender says they have “no overlays,” it means they follow the standard agency or government underwriting guidelines exactly as written without adding any extra requirements on top. For example, if FHA allows a 580 credit score and a 3.5% down payment, a lender with no overlays would approve that loan if it meets FHA standards. In contrast, many lenders add “overlays,” such as higher minimum credit scores, stricter debt-to-income limits, or extra documentation rules. For borrowers, working with a lender that has no overlays can make it easier to qualify, especially if your situation is borderline under the published guidelines — such as a lower credit score, higher DTI, or limited reserves. It can also mean faster underwriting, since there are fewer internal exceptions to navigate. However, “no overlays” doesn’t mean “no rules.” The loan must still meet all FHA, VA, USDA, or Fannie Mae/Freddie Mac requirements, and the lender still has to ensure the file is well-documented and saleable on the secondary market. It simply means the lender isn’t making the rules tighter than the agencies already do.
FDM has always followed a no overlay’s underwriting philosophy, and will continue to do so to support providing home ownership opportunities for the communities we serve.