Can You Get A Mortgage With Late Payments On A Home Purchase

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this blog, we will discuss and cover the question of can you get a mortgage with late payments on a home purchase. One of the questions we get asked often is Can You Get A Mortgage With Late Payments On A Home Purchase. The answer to this question is it depends on how many late payments and how long ago the late payment was. You can get a mortgage with prior bad credit. Mortgage applicants can get a mortgage with a prior bankruptcy, foreclosure, deed in lieu of foreclosure, short sale. This holds true as long as they meet the minimum waiting period requirements.

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Mortgage Approval With Bad Credit

Mortgage loan applicants can get a mortgage with outstanding collections and/or charged-off accounts. You do not have to pay outstanding collections and/or charged-off accounts and still qualify for a mortgage. Lenders, as well as the automated underwriting system (AUS), fully understand mortgage applicants could have prior bad credit due to extenuating circumstances. However, most people recover from unemployment and/or other extenuating circumstances and have new jobs and re-establish themselves. Lenders want to see borrowers have recovered and rebuilt their credit after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, or periods of bad credit. Lenders want to see borrowers have rebuilt and re-established their credit after bankruptcy and/or a housing event.

Can You Get A Mortgage With Late Payments: Late Payments After Bankruptcy And Foreclosure

Lenders will frown upon mortgage loan applicants with late payments after bankruptcy and/or foreclosure. Lenders consider mortgage applicants with late payments after bankruptcy and/or a housing event as second offenders. Many lenders will not approve any mortgage loan applicants with late payments after bankruptcy and/or foreclosure. This holds true as long as the bankruptcy and/or housing event are reporting on their credit reports. This holds true even though they get an approve/eligible per automated underwriting system (AUS).

Mortgage Approval With Late Payments After Bankruptcy and Foreclosure

One of two late payments after bankruptcy and/or a housing event is not always a deal killer. You can still get an approve/eligible per automated underwriting system (AUS) with one or two late payments after bankruptcy and/or a housing event. However, Gustan Cho Associates has no lender overlays on government and conventional loans. As long as the mortgage loan applicant can get an approve/eligible per automated underwriting system (AUS), Gustan Cho Associates will do the loan. We have zero lender overlays on FHA, VA, USDA, and Conventional loans.

The Importance Of Recent On-Time Payments

You can have prior bad credit and lower credit scores. However, lenders want to see timely payments in the past 12 to 24 months in order to approve you for a home mortgage. Timely payments in the past 12 to 24 months shows financial responsibility of borrowers. You can have outstanding collections and/or charged-off accounts and get an approve/eligible per automated underwriting system. This holds true as long as you have been timely on all of your payments in the past 12 to 24 months.

How Credit Profile Is Analyzed By AUS

Payment history, credit scores, and/or credit profiles do not matter on reverse mortgages. However, FHA, VA, USDA, and Conventional loans require an approve/eligible per automated underwriting system (AUS). The key in getting an approve/eligible per automated underwriting system is having timely payments in the past 12 months. However, you can still get an approve/eligible with one or two late payments in the past 12 months.

The Key In Getting An Approve/Eligible Per Automated Underwriting System

In general, you need timely payments on all monthly debts that report on credit reports to get an AUS approval:

However, one or two late payments are not always a deal killer
FHA loans allow two times 30 days late on a mortgage to get an approve/eligible per automated underwriting system on a purchase and/or a rate and term refinance
You cannot have have no more than two times 30 day late payments in the past 30 days
You need to have 12 months on time payments on all mortgage payments on cash-out FHA and VA loans
Once a case number is assigned, seasoning is measured from the case number assignment date

Properties mortgaged less than 12 months but more than 6 months from application date are allowed provided:

The mortgage payment history shows max 0x30 for the number of months it has been paid

Late Payment Guidelines On FHA And VA High-Balance Loans

With high balance FHA and VA loans, a maximum of one time 30-day late payment on a mortgage is allowed on purchase and rate and term refinance mortgage transactions. However, you cannot have any late payments on FHA and VA high-balance loans to get a cash-out refinance on FHA and VA high balance loans. Maximum 1×30 in 12 months prior to credit report date on purchase and rate and term refinance FHA and VA high-balance loans. High-Balance FHA and VA loans have stricter agency mortgage guidelines. Mortgage rates are higher on high-balance FHA and VA loans since they are considered riskier loans.

Late Payment Guidelines On Installment And Housing Payments On Conventional Loans

Installment And Housing Payments On Conventional Loans:

You cannot have any late payments in the past 12 months to get an approve/eligible per automated underwriting system on conventional loans
This holds true on mortgage late payments as well as other credit tradelines
You cannot have any more than 2 x 30 day late payments allowed in the past 13-24 months to get an approve/eligible per automated underwriting system on conventional loans
To get an approve/eligible on conventional loans, you cannot have any major derogatory credit on REVOLVING accounts in the past 12 months

HUD, the parent of FHA, has more lenient agency guidelines on late payments in the past 12 to 24 months to get an approve/eligible per automated underwriting system:

Here are the agency guidelines on FHA loans with regards to late payments:

Mortgage loan applicants are allowed up to 3 x 60 day late payments OR 1 x 90-day late payment on revolving credit cards to get an approve/eligible per automated underwriting system
NO Non-Medical collections in the past 12 months

120 Day Mortgage Late Payments

Borrowers who were late 120 or more days on mortgage payments can still qualify for a mortgage loan. However, many lenders will consider a 120 day late on a mortgage payment the same as a foreclosure and/or pre-foreclosure. This is not correct. A 120 day late mortgage payment is not the same as a pre-foreclosure and/or foreclosure. On FHA and VA loans, a 120 day mortgage late payment is allowed in the past three years from the date of a new mortgage loan application. This holds true if the current FHA and/or VA loan have been brought current. An up to date verification of mortgage is required reflecting the mortgage late payment has been brought up to date. Show the reason for the late payments and the 120-day late payment has been corrected.

Solutions For Home Buyers With Late Payments

Many homeowners who have sold their homes and need to purchase a new home but had late payments on the prior mortgage in the past 12 months often have trouble qualifying for a new mortgage. They still have trouble qualifying for a new mortgage even though the prior mortgage is paid off. However, Gustan Cho Associates has a solution. If you have a 20% down payment, you can qualify for a non-QM loan. Non-QM lenders do allow late payments in the past 12 months. However, a larger down payment is required. Use the non-QM financing as a bridge loan and refinance the higher non-QM mortgage rate into a government and/or conventional loan once you are able to get an approve/eligible per automated underwriting system.