Tips In Qualifying For Chicago Home Loan With Bad Credit
This ARTICLE On Chicago Home Loan With Bad Credit Was Updated On August 17, 2017
For those who were victims of the Great Recession of 2008 and have gone through a bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, lost their homes, lost their jobs, or just had their credit suffered, there is hope. The recovery of the Great Recession of 2008 has taken the longest in U.S. History. However, the Chicago and Illinois housing market is hot and many can qualify for Chicago Home Loan With Bad Credit.
There are six counties in the Chicagoland Area:
- Cook County
- Lake County
- Du Page County
- Kane County
- Will County
- Mc Henry County
2017 brings some great residential mortgage loan programs for home buyers seeking a Chicago home loan with bad credit.
- Home Buyers who have been turned down from their local bank and/or credit union because of bad credit or due to their lender overlays, The Gustan Cho Team at USA Mortgage is the lender of choice.
- Borrowers with prior bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, open unsatisfied collections, charge offs, late payments, or other credit issues can now qualify for mortgage loans with The Gustan Cho Team.
- The Gustan Cho Team at USA Mortgage, a division of DAS Acquisition Company LLC NMLS 227262 can help.
- We direct lenders with no lender overlays on government and conventional loans.
- The Gustan Cho Team has a national reputation of helping home buyers who are seeking a Chicago home loan with bad credit.
- Most buyers, especially first time home buyers, are under the belief that great credit is needed to qualify for a home loan.
- First Time Home Buyers also believe that a large down payment is required to qualify for a Chicago home loan.
- That is not the case and at The Gustan Cho Team at USA Mortgage.
- Our team of loan officers at The Gustan Cho Team specialize in helping families realize the dream of home ownership become a true reality.
How Is It Possible To Get Mortgage When Bank Turned Me Down?
Banks and credit unions have tighter mortgage lending guidelines.
- Over 75% of our borrowers are folks who have been turned down by other lenders such as banks, credit unions, and mortgage bankers with overlays.
- Many mortgage lenders like banks, credit unions, and mortgage bankers have mortgage lender overlays.
What Are Mortgage Lender Overlays?
FHA, Fannie Mae, Freddie Mac, VA, USDA, have minimum federal mortgage guidelines. Fannie Mae and Freddie Mac are two government sponsored enterprises that sets the standards for Conventional Loans. Lets take a loan scenario example on what mortgage guidelines are:
- The Federal Housing Administration does not require borrowers to pay off outstanding collections and charge offs.
- Minimum credit scores to qualify for a Illinois FHA Loan is 580 with a 3.5% down payment.
- However, a bank or other lender can have their own guidelines and rules that exceed the minimum of those from FHA.
- USDA minimum mortgage lending guidelines such as requiring a higher credit score such as 580 but most lenders require a 640.
- Lenders can and often do require borrowers to pay off existing outstanding collections and charge off accounts even though HUD, the parent of FHA, does not require it.
- FHA allows up to a 56.9% debt to income ratio and no greater than 46.9% front end DTI to get an approve/eligible per Automated Underwriting System approval but lenders can set their own standards which can be significantly lower.
- Most lenders have DTI Overlays capped between 45% to 50% on FHA Loans.
- FHA does not require rental verification for most mortgage loan applicants unless automated findings conditions for VOR but some lenders may require it.
- If you are seeking a Chicago home loan with bad credit, the best way to go about it is to seek a lender with no investor overlays.
- We specialize in helping borrowers who are seeking a Chicago home loan with bad credit.
- The Gustan Cho Team at USA Mortgage does not believe nor associate with investors with Overlays.
- As long as our borrowers can meet federal mortgage lending guidelines and get an automated approval, we are good to go and the loan will get approved and CLOSED!!!
- There are countless of our borrowers who have been turned down by multiple mortgage lenders and came to us and we were able to help.
- Here are a few Testimonials
Who Can We Help?
As long as borrowers have qualified income, we can help you get a mortgage approval and close on your dream home. Home buyers can qualify for mortgages with prior bankruptcies, foreclosures, short sales, and other types of bad credit. Outstanding collections and charge off accounts do not have to be paid in order for borrowers to qualify for Chicago Home Loan With Bad Credit. Borrowers with outstanding judgments and tax liens are eligible to qualify for FHA Loans under the following conditions:
- Be able to pay the outstanding balance prior to or at closing.
- Have a written payment agreement with the judgment credit if they have outstanding judgments or IRS if they have an outstanding tax lien.
- Three months of payment history on the above is required and borrowers cannot pre-pay the three month’s worth of payments in advance.
Credit Repair To Qualify For Chicago Home Loan With Bad Credit
Many of our borrowers are folks who have bruised credit and may be in need of credit repair. Many of our borrowers are folks who are just told NO by banks and other lenders because they currently do not qualify but can qualify in a matter of a short period of time. Again, there are minimum credit requirements to qualify for loan programs.
Here are the minimum credit qualification requirements for loan programs:
- FHA requires a minimum of a 580 credit score for a 3.5% down payment FHA Loan.
- Borrowers with credit scores between 500 and 579 FICO can qualify for FHA Loans but a 10% down payment is required.
- Most VA Lenders have lender overlays on VA Loans, however, we like to see at least a 580 credit score on VA Loans.
- Fannie Mae and Freddie Mac require a 620 credit score to qualify for Conventional Loans.
- Nationwide Mortgage and Realty LLC has Jumbo Loan Programs down to a 600 credit score.
Borrowers cannot have credit disputes during mortgage process unless they are medical collection account disputes or non-medical item disputes with zero balance. FHA will allow up to $1,000 in outstanding non-medical collection accounts overall to be in credit dispute without having to retract it. However, credit scores will drop when the disputes are retracted.
Borrowers who have their public records such as bankruptcies and/or foreclosures removed from their credit report through credit repair will have issues when lenders run third party public records searches during the mortgage process. All lenders will run a third party national public records search through Data Verify, Lexis Nexis, or other third party servicer. Removing collections, late payments, charge offs will not be a problem but borrowers will definitely have issues when public records gets deleted off their credit report.
Minimum Mortgage Lending Guidelines
We have no mortgage overlays on government and Conventional Loan Programs. As long as the borrower is approve/eligible per DU FINDINGS and/or LP FINDINGS and the borrower can meet the automated approval conditions, there should be no issue with closing the loan.
Here are the basic mortgage lending requirements:
- To qualify for a 3.5% down payment FHA Loan loan on a home purchase, minimum credit scores requires is 580 FICO.
- For those with credit scores between 500 to 580 FICO, a 10% down payment is required.
- Borrowers with credit scores lower than 580 FICO and cannot put 10% down payment, we will help get credit scores over 580 FICO to qualify for a 3.5% down payment purchase home loan.
- Open collections: Collection accounts with open unpaid balances do not need to be satisfied.
- By paying off old collection accounts, consumers will be re-activating old collection account which will drop credit scores.
- Prior Bankruptcy: There is a two year waiting period from the discharge date of bankruptcy to qualify for FHA Loan After Chapter 7 Bankruptcy discharged date.
- The is a one year waiting period after a bankruptcy discharge mortgage program available for those who qualify which is called FHA Back to Work Extenuating Circumstances due to an Economic Event which we will discuss later.
- Prior foreclosure and/or deed in lieu of foreclosure: There is a three year waiting period after the recorded date of the foreclosure and/or deed in lieu of foreclosure to qualify for a FHA insured 3.5% down payment loan.
- Fannie Mae and Freddie Mac allow Conventional Loan borrowers to qualify after meeting a four year waiting period after a deed in lieu of foreclosure or short sale.
- Short sale: To qualify for a 3.5% down payment purchase FHA insured residential mortgage loan after a short sale, there is a 3 year waiting period after the date of the short sale which is reflected on the HUD settlement statement.
- Fannie Mae and Freddie Mac require a four year waiting period after a short sale for borrowers to qualify for conventional loans.
- Judgments and tax liens: Many mortgage lenders will flat out reject if they have an unsatisfied judgment or tax lien unless you can pay them off prior to loan application.
- However, we can help borrowers get a mortgage loan with unsatisfied judgments and tax-liens so our borrowers can get a payment agreement with the judgment creditor and/or the Internal Revenue Service .
- Need to provide three months cancelled checks that has been paid to the judgment creditor and/or IRS or have the judgment and/or tax lien paid in full at closing.
- Gaps in employment: Borrowers can have gaps in employment the past two years and still qualify for a residential mortgage loan.
- Borrowers who have been unemployed for six months or less only need a 30 days of paycheck stubs with new employer to qualify for a residential mortgage loan.
- Borrowers who have been unemployed for six or more months need to be on new job for at least six months to qualify for a residential mortgage loan.
- Little or no income: Borrowers who cannot document income because they are self employed or work for cash can still qualify for a residential mortgage loan as long as they can get a non-occupant co-borrower.
- Recent late payments: Lenders have no issues with prior bad credit and/or open collections. However, they do want to see a history of timely payments in the past 12 months.
- One or two late payments in the past 12 months are not deal breakers with an approve/eligible per automated findings.
About The FHA Back To Work Mortgage Program
The United States Department of Housing and Urban Development, also known as HUD, has launched the FHA BACK TO WORK EXTENUATING CIRCUMSTANCES DUE TO AN ECONOMIC EVENT mortgage loan program on August 15, 2013. The FHA Back to Work Extenuating Circumstances due to an Economic Event mortgage loan programs shortens the waiting period to a one year waiting period after a person has had a bankruptcy discharge, had a foreclosure, deed in lieu of foreclosure, or short sale. However, the mortgage loan applicant needs to be qualified in a sense that they needed to have been unemployed and/or underemployed for at least six months and had a reduction of their household income of at least 20% and this economic event had led them to file bankruptcy or was the reason for them to have gone through the foreclosure, deed in lieu of foreclosure, or short sale. The FHA Back to Work mortgage loan applicant need to have re-established their credit since the economic event and not have had a single late payment. The FHA Back to Work mortgage loan applicant needs to have completed a one hour HUD approved housing counseling course and the mortgage application process cannot start 30 days after the housing certificate date of completion.
The FHA Back To Work Program has been discontinued.
Chicago VA Loans With Bad Credit
VA Loans are the best mortgage programs but are limited to veteran borrowers with a certificate of eligibility. The Gustan Cho Team at USA Mortgage are experts in the origination of Chicago VA Loans with bad credit.
Here are some highlights on our VA Loan Program:
VA Loans with bad credit loan programs:
- 100% financing
- 100% loan to value on VA Loans
- Minimum credit scores of 580 but veterans under 580 FICO may qualify with compensating factors
- 4% sellers concessions allowed on VA Loans
- VA Refinance Mortgage with no appraisal, no credit, no income verification: IRRRL
Other Traditional Loan Programs At USA Mortgage
Here are other loan programs USA Mortgage offers:
- USDA Loans with no investor overlays
- FHA Streamline Refinance
- FHA 203k Loans
- Non-QM Loans where there is no waiting period after bankruptcy or foreclosure
- Bank Statement Only mortgage programs
- Jumbo Mortgages with credit scores down to 600 FICO
- Condotel Financing and Non-Warrantable Condominium Loan Programs
- Commercial Mortgages
Gustan Cho NMLS ID 873293