Bad Credit Mortgage Loans Kansas

Bad Credit Mortgage Loans Kansas: Mortgage Approval With Low Credit Scores

Gustan Cho Associates are mortgage brokers licensed in 48 states

Homebuyers in Kansas with prior credit issues can now qualify for bad credit mortgage loans Kansas with credit scores as low as 500 FICO. The housing market in Kansas is booming. The Kansas bullish housing market is forecasted to continue to be strong for the next several years despite the rising inflation, coronavirus vaccine mandates in red states, and rising rates due to inflation.

Bullish Kansas Housing Market Expected To Get Stronger

Despite the rising values of homes in Kansas, homes are still affordable where buyers are not priced out of the housing market like in many other states. Interest rates are increasing and are expected to increase further. However, rates are still at historic lows. Many Americans in high-taxed states choose Kansas as one of the top choices of states to migrate to due to the affordable home prices, low taxes, great landscape, the strong robust economy, and great job opportunities.

The Kansas Housing Recovery After The 2008 Housing And Banking Crisis

Kansas is one of the hardest-hit states by the Great Recession and Housing Collapse of 2008. Homebuyers who have credit scores between 500 and 580 FICO credit scores can still qualify for a mortgage loan. Never in the state of Kansas has the housing market collapsed as it did back in 2008. Many Kansas homeowners had mortgage loans with teaser rates. Many homeowners had adjustable-rate mortgages which skyrocketed to double and triple after the teaser rate period was over. Fortunately, the economy in Kansas has recovered and so did the housing market. Many homeowners who went bankrupt or went through a housing event such as a foreclosure and/or short sale have recovered. They are now ready to purchase a home. In this article, we will cover and discuss the various mortgage options homebuyers have in Kansas with bad credit and lower credit scores.

Kansas FHA Loan Requirements

FHA loans are the best mortgage loan program for homebuyers in Kansas with credit scores down to 500 FICO with bad credit. HUD, the parent of FHA, has the most lenient mortgage guidelines than any other loan program in the nation. Conventional loans require substantially higher credit scores and have higher credit requirements versus FHA loans.

Kansas FHA Lenders For Bad Credit Homebuyers

Not all Kansas FHA lenders have the same FHA loan requirements on FHA loans. FHA loans are the best loan program for homebuyers with bad credit and lower credit scores to purchase a home with a 3.5% down payment. There are other mortgage loan programs for bad credit which are called non-QM mortgages that we will cover in this blog.  Gustan Cho Associates NMLS 2315275 is a mortgage company with no lender overlays on government and conventional loans. Gustan Cho Associates are mortgage bankers, correspondent lenders and have the ability to broker non-QM and alternative specialty mortgage loan programs in Kansas.

Kansas FHA Loans For Bad Credit

Homebuyers in Kansas with credit scores between 500 and 579 FICO can now qualify for FHA loans. Per HUD Guidelines, for homebuyers with credit scores under 580 FICO, the minimum down payment required is 10% versus the 3.5% down payment required for homebuyers with at least a 580 credit score. To qualify for FHA loans with a 3.5% down payment in the state of Kansas, home buyers need a minimum of a 580 credit score.

FHA Loans In Kansas With 500 Credit Scores

Homebuyers with under 580 credit scores would need to get an approve/eligible per automated underwriting system (AUS) or meet manual underwriting guidelines if the borrower cannot get an AUS approval and gets a refer/eligible per AUS. If the file is a manual underwrite, there are other criteria taken into consideration by the mortgage underwriter. Mortgage underwriters have a lot of underwriter discretion on manual underwrites.

Automated Underwriting System Versus Manual Underwriting Requirements On FHA Loans In Kansas

HUD allows manual underwriting on FHA loans. Borrowers who cannot get an approve/eligible per automated underwriting system (AUS) and the findings render a refer/eligible per AUS, the file can be manually underwritten. Manual underwriting is almost the same as AUS-approved files except for the debt to income ratio is reduced to a maximum of 40% front-end and 50% back-end with two compensating factors. Manual underwriting is required when the mortgage underwrite may determine the automated underwriting system (AUS) approval is borderline and too risky for the lender and will manually downgrade the file. To meet manual underwriting guidelines, the borrower needs to be timely on all monthly payments in the past 24 months. Verification of rent is required on manual underwriting files.

Importance Of Understanding HUD Guidelines Versus Overlays By Mortgage Lenders

Not all Kansas FHA lenders will have the same mortgage loan requirements on FHA loans. Just because one lender says you do not qualify does not mean a different lender will not approve you. Most lenders have higher lending requirements that are above and beyond the minimum HUD guidelines. The higher lending requirements by the individual mortgage lenders are called lender overlays.

Getting Denied For A Mortgage From Kansas FHA Lenders Due to Lender Overlays

When a loan officer denies a loan due to the lender overlays, they normally do not give you a detailed explanation that the exact reason was due to their overlays. The loan officer may just tell you that you do not qualify because your credit score is below 640 FICO and you do not meet the lender’s minimum credit score requirements. However, if you know the basic FHA credit score requirements, if you want quality for a 3.5% down payment FHA loan, you need a 580 credit score. If you have credit scores below 580 and down to 500 FICO,  you need to put in a 10% down payment. Lenders with no lender overlays on FHA loans will approve you if you meet the minimum HUD guidelines on FHA loans.

FHA Lenders For Bad Credit Mortgage Loans Kansas With No Overlays On FHA Loans

Gustan Cho Associates has no lender overlays on FHA loans. We go off the AUS findings and have no other layers of lending overlays. We are experts on FHA manual underwriting. Gustan Cho Associates are experts in Bad Credit Mortgage Loans with no lender overlays. Mortgage Overlays are additional lending requirements that are above and beyond those of the minimum mortgage guidelines per loan program.

FHA Bad Credit Mortgage Loans Kansas With Low Credit Scores

We help countless mortgage borrowers get qualified for Bad Credit Mortgage Loans. The most popular Bad Credit Mortgage Loans are FHA loans. Mortgage lenders who specialize in bad credit mortgage loans Kansas like to see no late payments in the past 12 months. They also do not like to see late payments after a bankruptcy and/or foreclosure Many lenders who do originate and fund Bad Credit Mortgage Loans Kansas will automatically disqualify borrowers with late payments after bankruptcy and/or foreclosure. Gustan Cho Associates will only go off AUS FINDINGS and late payments after bankruptcy, foreclosure, deed in lieu of foreclosure, a short sale is not a deal killer. Other factors they frown upon are overdrafts in the past 12 months. At Gustan Cho Associates, overdrafts are fine with a good letter of explanation. Mortgage lenders also want to see three established credit tradelines that are at least one year old.

Kansas FHA Lenders For Borrowers With No Credit Scores

In the event if the borrower does not have three credit tradelines, some lenders who specialize in bad credit mortgage loans Kansas will take non-traditional tradelines such as the following:

  • utility payment history
  • rental verification
  • cell phone payment history

Credit Tradelines is not an FHA loan requirement per HUD Guidelines. We do not require any credit tradeline requirements as long as the applicant gets an approve/eligible per Automated Underwriting System

Verification Of Rent Requirements On Manual Underwriting And Bad Credit Mortgages

Lenders who specialize in bad credit mortgage loans want to see one-year verification of rent as part of their lender overlays. Rental verification is required on manual underwriting. Verification of rent can be waived by some lenders if the borrower has been living rent-free with a family member to save money for the down payment on a home purchase. In many instances with lower credit score borrowers or borrowers with higher debt to income ratios, the Automated Underwriting System Findings may require verification of rent.

How Mortgage Underwriters Determine And Accept Verification Of Rent

A cash receipt from the landlord is not valid as verification of rent for a mortgage lender.

A cash receipt from the landlord is not valid as verification of rent for a mortgage lender. If you made your rent payments with cash for the past 12 months and got a receipt from the landlord, this form of payment is not valid with the lender. Even a letter from a private landlord that you have been timely on all of your payments is not acceptable.

How Does Verification Work?

Verification Of Rent is only valid by providing 12 months of on-time canceled checks and/or 12 months of bank statements if the landlord is not a property management company. If the renter is renting from a registered property management company, then a verification of rent form, also known as a VOR, provided by the lender needs to be completed and signed/dated by the property management manager. VOR by the property manager can be used in lieu of canceled checks and/or bank statements. A letter from a licensed property management company could be used as proof of rental verification. For renters who are renting an apartment or home from an individual, canceled checks will be required as proof of rental verification. In the event renters do not have rental verification because monthly housing expenses are paid with cash or live with family, borrowers can still get mortgage approval. But the debt to income ratio requirements might be stricter.

Lenders Specializing In VA And FHA Bad Credit Mortgage Loans Kansas

Banks normally do not deal with bad credit mortgage loans Kansas. Most Kansas mortgage lenders have lender overlays on government and conventional loans. The majority of Kansas VA lenders require 620 to 640 credit scores on VA loans. Most Kansas FHA lenders require 620 to 660 credit scores on FHA loans even though HUD Guidelines require 580 credit scores on FHA loans. There are no minimum credit score requirements and/or debt to income ratio requirements on VA Loans. Gustan Cho Associates approves VA Loans and FHA Loans with under 600 credit scores and has no lender overlays on FHA and VA loans. If mortgage borrowers’ credit scores are under 620 they should consult with a mortgage company that specializes in bad credit mortgages.

Non-QM Loans For Bad Credit Mortgage Loans Kansas

FHA loans are the best loan program for bad credit mortgages for homebuyers with little down payment. Other mortgage options borrowers have are non-QM loans. Non-QM mortgages are alternative loan programs for bad credit, no-doc loans, no income verification, banks statement loans for self-employed borrowers, asset-depletion, non-QM loans one day out of bankruptcy and/or foreclosure, or dozens of other specialty loan products. However, non-QM loans require a 20% to a 30% down payment.

FHA Minimum Credit And Income Requirements

Here are the requirements to qualify for FHA Loans With Bad Credit in Kansas:

  • 580 credit scores for 3.5% down payment
  • Outstanding collections and charge off accounts do not have to be paid off
  • Maximum debt to income ratio capped at 46.9% front end and 56.9% back end for borrowers with at least a 620 credit score to get an approve/eligible per Automated Underwriting System
  • Under 620 credit scores, DTI is capped at 43% to get approve/eligible
  • Loan Officer will  complete a 1003 mortgage application and will run a credit check
  • For borrowers who have scores close to a 580 FICO credit score, the loan officer may help borrowers boost credit scores to qualify for a 3.5% down payment Kansas FHA loan versus having to put down a 10% down payment for under 580 credit scores

Please contact Gustan Cho Associates at 800-900-8569 or text for a faster response. Or email us at

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