Bad Credit Mortgage Guidelines On Home Purchase And Refinance

This Article Is About Bad Credit Mortgage Guidelines On Home Purchase And Refinance

Mortgage Borrowers can qualify for home loans with bad credit per Bad Credit Mortgage Guidelines.

All owner occupant mortgage loan programs permit home buyers and homeowners to qualify for mortgage with the following:
collections
charge offs
tax liens
judgments
child support in arrears
late payments
We will discuss Bad Credit Mortgage Guidelines and how borrowers can qualify for a home loan with bad credit on this blog

Agency Guidelines Versus Lender Overlays

All borrowers need to meet agency guidelines.

Mortgage agencies are FHA, VA, USDA, Fannie Mae, Freddie Mac. Mortgage lenders can have their own set of guidelines that surpass agency lending requirements
The additional guidelines on top, above, and beyond agency guidelines are called lender overlays
Lenders can have overlays on just about anything. Minimum credit scores to qualify for 3.5% down payment FHA Loans is 580 FICO
However, if borrowers visit most banks, most FDIC banks have credit score overlays on FHA Loans where they require 640 credit scores

Qualifying For Mortgage With Derogatory Credit Tradelines

Many people believe they cannot get a mortgage if they have any collections, charge offs, tax liens, child support payments or judgments. Let’s start with collections.

The rule of collections is that you can get a mortgage
But if you have over $2,000 of outstanding collections excluding medical you have to hit your debt ratio with a hypothetical payment
This payment is 5% of your total collections
For example if you had $4,000 in collections then you would hit your debt ratio with $200 dollars a month
If you still qualify then you can get a home loan with collections

Bad Credit Mortgage Guidelines On Charged Off Accounts

Charge offs are considered just like medical collections.

When getting a home loan charge offs will not count against you
Some lenders have overlays and will hit you with a 5% payment but this is not how the guidelines read
Gustan Cho Associates is one of the very few national lenders that has no overlays on government and conventional loans
Charged off accounts are ignored by our mortgage underwriters and do not have to be paid

Bad Credit Mortgage Guidelines On Outstanding Tax Liens

Tax liens will have to be satisfied.

Either at closing with a cash-out refinance loan proceeds
Or pay it before you start the process or a payment plan
Most lenders do not honor the third option
We do
As long as you have your tax lien in a payment program and have made 3 payments on time you can get a home loan

Bad Credit Mortgage Guidelines On Judgments And Child Support

Judgments are like Tax liens. You have to have made 3 payments on time on anew agreement or pay off during or before you start the loan process.

Child support in arrears is a little different
Most lenders want this paid in full
We have an investor that will allow you to purchase a home
This holds true as long as you have made your regular payments on time for 12 months
Required is that you have a new separate agreement for the arrears and this has been paid on time for 12 months also

How Mortgage Underwriters Analyze Consumer Credit Reports

Collections and Charge offs will show up on your credit.

But tax liens, delinquent child support, and judgments no longer show up on credit
There was a new rule for Credit reporting agencies to remove this from standard credit reports to help the consumer with having their credit look better
But this has caused some stressful moments for consumers in the home purchasing process
These show up on title and fraud background checks
These are sometimes pulled at the end of the process surprising all parties and usually killing the transaction
If you have these issues please tell your loan officer so you can come up with a plan of action
They will come up
Knowing that you have these issues early can give people an opportunity to buy a house who thought they couldn’t and make the home purchase process less stressful
Getting a tax lien into a repayment program is generally very easy. Not all judgment companies are as cooperative
When calling the judgment companies you do not want to tell them that you are looking to buy a house
This puts them in a power position where you need them
I recommend that you just call them as say you feel like taking care of your old debts
This makes them favorable in putting you into a new payment program
I hope this helps and I hope to hear from you soon

Qualifying For Home Loan With Bad Credit With Direct Lender With No Overlays

Borrowers who need to get qualified with a direct lender with no overlays on government and conforming loans, please do not hesitate to contact us at Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.