Bad Credit Mortgage Loans Colorado With No Lender Overlays

Bad Credit Mortgage Loans Colorado With No Lender Overlays

This BLOG On Bad Credit Mortgage Loans Colorado With No Lender Overlays Was UPDATED On January 16th, 2018

The Gustan Cho Team at USA Mortgage is one of the few direct mortgage lenders licensed in the state of Colorado with no mortgage overlays on government and conventional loans. We have many loan officers licensed in Colorado that specialize and help borrowers with Bad Credit Mortgage Loans Colorado. Since we have no mortgage overlays on FHA, VA, USDA, and Conventional Loans in Colorado, we just go off the Automated Underwriting System Approval Findings.

Millions of Americans have gone through periods of financial hardships such as the following:

  • Job loss
  • Business loss
  • Medical issues
  • Divorce
  • Death

With the above types of extenuating circumstances, many had damage to their credit scoreColorado was one of the many states that got affected by the Great Recession of 2008.

  • Many Colorado residents were forced into bankruptcy or foreclosure due to the recent economic collapse 
  • Many Colorado citizens had to settle to job or career changes that had severe household income reduction where they had to downsize and reorganize their financial budget

Qualifying For Bad Credit Mortgage Loans Colorado With FHA Loans

Thanks to the Federal Housing Administration (FHA) , home buyers can have a second chance in home ownership with bad credit mortgage loans Colorado.

  • The United States Department of Housing and Urban Development (HUD) is the parent of FHA
  • HUD’s goal and mission is to promote home ownership for home buyers, especially first time home buyers with the following:
    • Little down payment
    • Less than perfect credit
    • Prior bad credit
    • No credit
    • Limited credit histories

History Of FHA

The Federal Housing Administration have been assisting home buyers since 1934 realize the American dream of home ownership

  • Unlike any other country in this planet, every hard working American can become homeowners due to the light mortgage lending guidelines of FHA insured mortgage loans

Federal Housing Administration

The Federal Housing Administration does not originate or fund mortgage loans.

  • The Federal and Housing Administration is a division of the United States Department of Housing and Urban Development ( HUD )
  • Its main function is to insure private mortgage lenders against defaults of mortgage loans through the FHA insured mortgage loan programs
  • Mortgage lenders need to abide the FHA mortgage lending guidelines and be HUD Approved Lender in order for FHA to insure FHA Loans

Bad Credit Mortgage Loans Colorado With High DTI

FHA insured mortgage loans are not just bad credit mortgage loans.

  • FHA insured mortgage loans are for those who do not qualify for conventional mortgage loans due to the following:
  • FHA insured mortgage loans are an excellent mortgage loan program for the following borrowers
    • Lower credit scores
    • No credit scores
    • Short term credit history
    • Prior bankruptcy
    • Prior foreclosure
    • Outstanding collections
    • Outstanding charge off accounts
    • Gaps in employment and short term on the job
    • Little or no reserves
    • No rental verification
    • Borrowers that need non-occupant co-borrowers
    • Others with credit and financial issues

Qualifying For Bad Credit Mortgage Loans Colorado With No Credit

The Federal Housing Administration allows mortgage loan borrowers with little credit or no credit history eligible for FHA Loans.

  • Mortgage borrowers can have no credit scores and still qualify for FHA insured mortgage loans
  • For those mortgage loan borrowers with no credit scores and no credit tradelines, non traditional credit can be used in lieu of traditional credit tradelines
  • Non traditional credit are tradelines are the following:
    • Rental verification
    • Insurance payments
    • Cellular bills
    • Water bills
    • Electric bills
    • Gas bills
    • School tuition
    • Internet bills
    • Other forms of credit that the creditor does not report to the credit bureaus

Qualifying For Bad Credit Mortgage Loans Colorado During And After Chapter 13 Bankruptcy

A home mortgage loan borrower can qualify for VA Loans and FHA insured mortgage loan after a 2 year waiting period from the discharge date of Chapter 7 bankruptcy. Both VA and FHA have the same mortgage guidelines in qualification requirements during and after Chapter 13 Bankruptcy.

  • Mortgage Borrowers under a Chapter 13 Bankruptcy Repayment Plan can qualify for both VA Loans and FHA Loans during Chapter 13 Bankruptcy Repayment Plan one year into a Chapter 13 Repayment
  • Need 12 months timely payments to creditors. Approval of Chapter 13 Trustee (Normally this is never a problem where the Chapter 13 Bankruptcy Trustee signs off on it). 580 minimum credit scores for 3.5% down payment home purchase
  • Manual Underwriting
  • Over 40% of The Gustan Cho Team at USA Mortgage borrowers are folks during and/or after Chapter 13 Bankruptcy discharged date
  • Mortgage lenders do want to see re-established credit after Chapter 7 bankruptcy and no late payment history after a bankruptcy

Bad Credit Mortgage Loans Colorado After Housing Event

For those who had a prior foreclosure, deed in lieu of foreclosure, or short sale, they can qualify for a FHA Loan after the following:

  • Three years from the recorded date of the foreclosure or deed in lieu of foreclosure
  • Three years from the date of the HUD settlement statement of the short sale

VA Loans require mandatory waiting period as follows:

  • Two year waiting period after foreclosure and deed in lieu of foreclosure
  • Two year waiting period after short sale date

Fannie Mae and Freddie Mac require the following waiting period after housing event:

  • 4 year waiting period after deed in lieu of foreclosure and/or short sale
  • 7 years after standard foreclosure

Qualifying For Mortgage With Outstanding Collections And Derogatory Credit

The Federal Housing Administration understands that people do go through periods of financial hardship.

  • Borrowers can have prior bad credit and open collections and still qualify for a FHA insured mortgage loan
  • Borrowers do not have to pay off old collection accounts in order to get a FHA insured mortgage loan approval
  • I strongly do not recommend borrowers pay off any old collection account
  • Paying off an old collection account will reactive derogatory credit tradeline and can drop credit scores
  • I have seen people’s credit scores dropping by 80 or more points just by paying an old collection account

Judgments And Tax Liens

Judgments and tax liens are the worst possible derogatory item you can have on your credit report.

  • Borrowers can get a FHA insured mortgage loan with outstanding judgments and/or tax liens only if they enter into a payment agreement with the judgment creditor and/or the Internal Revenue Service
  • Need a minimum of three month payment history
  • Provide the mortgage lender three months worth of cancelled checks and/or bank statements
  • The payment agreement is not enforced by lender after loan closing

Recent Late Payments

Recent late payments are really frowned upon by mortgage lenders.

  • Borrowers can have a recent late payment and still qualify for bad credit mortgage loans Colorado
  • However, having a history of late payments can prove to the mortgage lender that borrowers is financially irresponsible credit risk and pose a problem
  • One or two late payments in the past 12 months with a good letter of explanation should pose no threat
  • However, habitual late payers may need to wait six months of paying bills on time and re-apply after showing history of on time payments
  • Overdrafts in the past 12 months are really frowned upon as well
  • Again, as with recent late payments, one or two overdrafts are acceptable
  • Consistent monthly overdrafts could pose a problem
  • There should be no bank overdrafts in the past 60 days

Qualifying For Mortgage With Direct Lender With No Overlays

The Gustan Cho Team at USA Mortgage are direct lenders with no mortgage overlays on government and conventional loans. Colorado mortgage borrowers who need to qualify for Bad Credit Mortgage Loans Colorado, please contact us at 262-716-8151 or email us at gcho@usa-mortgage.com. We are available 7 days a week, evenings, weekends, and holidays.

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