Bad Credit Home Loan With No Overlays & Low Credit Scores

This BLOG On Bad Credit Home Loan With No Overlays & Low Credit Scores Was UPDATED On August 17, 2017

Many hard working Americans were affected by the real estate and credit collapse of 2008.
  • Many business owners had to close their businesses, many lost jobs due to corporate lay offs, and many had to settle with new jobs where they were overqualified.
  • Due to this financial impact many folks had a drastic reduction of household incomes where they fell behind on paying their debt obligations.
  • Countless of hard working Americans had to file bankruptcy and many were left with homes with mortgage balances higher than the value of their properties.
  • Foreclosure and short sale rates hit historical highs.
  • Property values in all counties in the U.S. plummeted after the subprime and mortgage meltdown of 2008.  

Recovery Of U.S. Housing Market

  • Housing values in most parts of the U.S. has now recovered.
  • Housing market in many states has never been so much in demand.
  • Home buyers who need bad credit home loan with no overlays can now qualify with FHA Loans with credit scores down to 580 FICO and 3.5% down payment.
Obtaining a FHA Loan is no longer an issue for home buyers with the following:
  • Bad credit
  • High debt to income ratio
  • Mortgage For Self Employed Borrowers is now available with Bank Statement Mortgage Loans
  • Buyers with bankruptcies or foreclosures
  • Borrowers with outstanding collections and charge offs
  • Borrowers with late payments after bankruptcy and foreclosure

Qualifying for Bad Credit Home Loan

Home values throughout the United States have increased year after year. National housing statistics show that real estate values have been increasing double digits in many counties throughout the United States since 2010.  HUD, the parent of FHA, has totally revamped FHA Guidelines to make home ownership affordable for home buyers with bad credit home loan with the following:
  • Low credit scores
  • Outstanding Collections and Charge Offs without needing to pay them off
  • Higher debt to income ratios.
  • Prior bankruptcy and foreclosure
Here are basic FHA Guidelines for Bad Credit Home Loan With No Overlays:
  • FHA requires minimum credit score of 580 FICO for 3.5% down payment home purchase mortgage
  • Borrowers with credit scores between 500 FICO and 579 can qualify for FHA Loan but need to put 10% down payment
  • Outstanding collection accounts and charge off accounts do not have to be paid off to qualify for FHA Loans
  • FHA allows debt to income ratios of 46.9% DTI front end, 56.9% DTI back end to qualify for borrowers with at least a 620 credit score
  • 43% DTI for borrowers under 620 FICO 
  • FHA requires two year waiting period after Chapter 7 Bankruptcy discharged date to qualify for FHA Loan
  • FHA allows borrowers in a Chapter 13 Bankruptcy Repayment Plan to qualify for FHA Loans.
  • Borrowers can qualify for FHA Loans one year into their repayment plan to creditors while in the Chapter 13 Bankruptcy without needing to have it being discharged with Trustee Approval
  • FHA does not require any waiting period to qualify for FHA Loans after a Chapter 13 Bankruptcy discharged date with a manual underwrite
  • There is a 3 year waiting period to qualify for FHA Loans after the recorded date of deed in lieu of foreclosure and/or foreclosure
  • There is a 3 year waiting period to qualify for FHA Loans after a short sale
  • There is no waiting period to qualify for FHA Loans After Timeshare Foreclosure

Bad Credit Home Loan Versus Recent Late Payments

When the real estate market crashed, it crashed super hard.
  • Bankruptcies, foreclosures, and short sales were recorded in record numbers all over the United States. 
  • The Real Estate market has since recovered from the 2008 subprime real estate crash. 
  • Many homeowners were left with mortgage balances higher than the value of their homes.
The mortgage industry has completely changed and new rules and regulations have been implemented. Home buyers can now qualify for Bad Credit Home Loan with FHA Loans with no lender overlays.

Mortgage Regulations After Real Estate Crash

Half of the mortgage loan originators have been eliminated after the Great Recession of 2008 and the subprime market has become extinct because the government have place strict licensing guidelines.
  • The whole mortgage industry went through a major overhaul and the SAFE ACT and NMLS was created and implemented which now requires mortgage loan originators to undergo education.
  • Federal and state exams, extensive criminal background investigations, and credit background investigations as well.
  • Mortgage Loans For Self Employed Borrowers have become extinct but the great news is that many lenders are now offering non-qm loans and alternative financing for self employed borrowers.
  • Bank Statement Mortgage Loans are back.
  • There are no waiting period after bankruptcy and foreclosure to qualify for a home loan with non-qm loans.
  • Home buyers can qualify for 3.5% down payment FHA Loans with credit scores down 580 FICO and outstanding collections and charge offs.

FHA Bad Credit Home Loan With No Overlays

The Federal Housing Administration, also known as FHA, and the Veterans Administration, also known as VA, have created FHA loan and VA loan programs that made hard working Americans with prior bad credit eligible for mortgage loans.
  • Today, mortgage borrowers with credit scores of under 600 can qualify for bad credit home loan.  
  • The minimum credit score required for FHA bad credit home loan with a 3.5% down payment is 580. 
  • FHA borrowers with under 580 FICO credit scores can qualify for FHA Loans with 10% down payment.
  • Many mortgage lenders have their own minimum credit score requirement.
  • The majority of them do have minimum credit score requirements of 620 to 640 but that is not a HUD Requirement but it is called lender overlays on the particular lender.
  • Lenders can require higher credit score requirements than those required by FHA.
  • Borrowers who meet minimum credit scores of 580 but are told they do not qualify by a particular lender or bank is due to that particular lender overlays.
  • There are many lenders with no lender overlays on FHA Loans, VA Loans, USDA Loans, and Conventional Loans.
  • Home Buyers can qualify for FHA Loans with 500 credit scores with 10% down payment as long as they can get an approve/eligible per Automated Underwriting System.

Late Payments After Bankruptcy And Foreclosure

Mortgage lenders do not want to see any late payments after you have filed bankruptcy or have had a home foreclosure.
  • Most lenders will automatically disqualify mortgage applicants with any late payment after bankruptcy and/or foreclosure and/or short sale.
  • Mortgage lenders do not want to see any late payments whatsoever for the past 12 months. 
  • Borrowers with late payment after a bankruptcy or foreclosure will have difficult time finding lenders to approve their FHA Loan.
  • I can help borrowers with late payments after bankruptcy and/or foreclosure as long as they can get an approve/eligible per Automated Underwriting System.
  • Late payments after bankruptcy and foreclosure is not an automatic denial.
  • Depends on lenders.

The Gustan Cho Team are specialists in helping home buyers qualify for Bad Credit Mortgage Loan With No Overlays. Home buyers who have any questions about Bad Credit Home Loan With No Overlays can contact us at 800-900-8569 or email us at gcho@gustancho.com.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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