This Article Is About Bad Credit Mortgage Loans Colorado With No Lender Overlays
Colorado has one of the hottest housing markets in the nation. This is because the entire state has low property taxes. Many families and businesses are migrating to Colorado due to its low property taxes, low cost of living, and affordable housing. Although home prices are higher than the national median home prices, many people still find buying homes in Colorado very attractive due to the low property taxes. Homes are in major demand. Most homes throughout the state of Colorado are selling above the listed price. It is the norm to have a home in Colorado to sell over 10% of the asking price. Demand for homes in Colorado is expected to continue to rise due to the heavy demand. In this article, we will discuss and cover qualifying for a mortgage in Colorado with bad credit with lenders with no lender overlays. Gustan Cho Associates has no lender overlays on government and conventional loans.
The Key In Getting Approved For A Mortgage With Bad Credit Is To Qualify With A Lender With No Overlays
Gustan Cho Associates is one of the few direct lenders licensed in the state of Colorado with no 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 lender overlays on FHA, VA, USDA, and Conventional Loans in Colorado, we just go off the Automated Underwriting System Approval Findings. In this article, we will cover and discuss qualifying for a mortgage in Colorado with bad credit.
Home Buyers Can Qualify For Mortgage With Bad Credit
Millions of Americans have gone through periods of financial hardships such as the following:
- Job loss
- Business loss
- Medical issues
With the above types of extenuating circumstances, many had damage to their credit score. Colorado 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), homebuyers can have a second chance in homeownership 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 are to promote homeownership 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 has been assisting home buyers since 1934 realize the American dream of homeownership. Unlike any other country on this planet, every hardworking 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 lenders against defaults of borrowers who default on their FHA Loans. Lenders need to abide by the FHA guidelines and be HUD Approved Lender.
Bad Credit Mortgage Loans Colorado With High DTI
FHA loans are not just bad credit mortgage loans.
FHA loans are for those who do not qualify for conventional loans due to the following:
- Borrowers high debt to income ratios
- Self-employed borrowers
- Those who have their mortgages underwater
FHA insured mortgage loans are an excellent 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 borrowers with little credit or no credit history eligible for FHA Loans. Borrowers can have no credit scores and still qualify for FHA loans. For borrowers with no credit scores and no credit tradelines, non-traditional credit can be used in lieu of traditional credit tradelines.
Examples Of Non-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
Borrowers can qualify for VA and FHA Loans 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.
- 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 of 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 our borrowers are folks during and/or after the Chapter 13 Bankruptcy discharged date
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 an 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 a mandatory waiting period as follows:
- Two year waiting period after foreclosure and deed in lieu of foreclosure
- Two year waiting period after the short sale date
Fannie Mae and Freddie Mac require the following waiting period after housing event:
- 4 year waiting period after a 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 an FHA loan. Borrowers do not have to pay off old collection accounts in order to get an FHA 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 mortgage with outstanding judgments as long as they have a written payment agreement with the judgment creditor and have made three timely payments. Borrowers can qualify for an FHA loan with outstanding tax liens as long as they have a written payment agreement with the Internal Revenue Service. The borrower needs to have made three timely payments per the IRS written payment agreement. Need a minimum of three-month payment history on the tax lien and cannot be prepaid upfront to meet the qualification requirements. The payment agreement is not enforced by the lender after loan closing. Fannie Mae and Freddie Mac do not allow tax liens on conventional loans. You can qualify for a conventional loan with tax debts that is delinquent but cannot be a tax lien. You need a written payment agreement with the IRS and need to have made one monthly payment prior to closing to qualify for a conventional loan with outstanding tax debts.
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 lender that borrowers are 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 a 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 A Lender With No Lender Overlays
Gustan Cho Associates is a mortgage company licensed in multiple states with no mortgage lender overlays on government and conventional loans. Colorado mortgage borrowers who need to qualify for Bad Credit Mortgage Loans Colorado, please contact us at 800-900-8569 or text us for a faster response. Or email us at firstname.lastname@example.org. We are available 7 days a week, evenings, weekends, and holidays.
May 12, 2021 - 6 min read