Chicago Home Loan With Bad Credit Mortgage Guidelines

In this blog, we will discuss and cover qualifying and getting approved for a Chicago home loan with bad credit. There is hope for those who were victims of the Great Recession of 2008.

Many have gone through bankruptcy, foreclosure, deed instead of foreclosure, short sale, lost their homes, jobs, or just had their credit suffer. The recovery from 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.

Many mortgage lenders like banks, credit unions, and mortgage bankers have mortgage lender overlays. Gustan Cho Associates are experts in helping borrowers qualify for Chicago Home Loan With Bad Credit.

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Chicago Housing Market

There are six counties in the Chicagoland Area:

Cook County
Lake County
Du Page County
Kane County
Will County
Mc Henry County

Chicago Home Loan With Bad Credit Mortgage Lenders

2023 brings some great residential mortgage loan programs for homebuyers seeking a Chicago home loan with bad credit. Homebuyers who have been turned down by their local bank or credit union. This is because of bad credit or due to their lender overlays. Gustan Cho Associates 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 at Gustan Cho Associates.

Gustan Cho Associates can help. We are a mortgage company licensed in 48 states with over 210 lending relationships with wholesale lenders. Gustan Cho Associates Mortgage has a national reputation for its no-lender overlays on government and conventional loans.

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Homebuyers Can Qualify For a Mortgage With Credit Scores Down To 500 FICO

Gustan Cho Associates has a national reputation for helping homebuyers 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 Homebuyers also believe that a large down payment is required to qualify for a Chicago home loan. That is not the case at Gustan Cho Associates. Our team of loan officers at Gustan Cho Associates specializes in helping families realize the dream of homeownership become a reality.

Banks and credit unions have tighter mortgage lending guidelines. To qualify for Chicago Home Loan With Bad Credit, it is best to consult a direct lender with no overlays. Over 75% of our borrowers have been turned down by other lenders such as banks, credit unions, and mortgage bankers with overlays.

What Are Mortgage Lender Overlays?

FHA, Fannie Mae, Freddie Mac, VA, and USDA, have minimum federal mortgage guidelines. Fannie Mae and Freddie Mac are two government-sponsored enterprises that set the standards for Conventional Loans. Let’s take a loan scenario example of what mortgage guidelines are:

The Federal Housing Administration does not require borrowers to pay off outstanding collections and charge offs
The minimum credit score to qualify for an Illinois FHA loan is 580, with a 3.5% down payment
However, a bank or other lender can have guidelines and rules that exceed the minimum agency guidelines
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.

HUD 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.

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Agency Guidelines Versus Lender Overlays

But lenders can set their standards, which can be significantly lower. Most lenders have DTI Overlays capped between 45% to 50% on FHA Loans. HUD 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 seeking a Chicago home loan with bad credit.

Gustan Cho Associates does not believe in nor associate with investors with overlays. As long as our borrowers can meet federal mortgage lending guidelines and get automated approval, we are good to go, and the loan will get approved and CLOSED!!! There are countless of our borrowers who multiple mortgage lenders have turned down and come to us, and we were able to help.

Here are a few Testimonials

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FHA Loans With Judgment and Tax-Lien

As long as borrowers have qualified income, we can help you get mortgage approval and close on your dream home. Homebuyers 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 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 before or at closing
Have a written payment agreement with the judgment creditor 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 have bruised credit and may need credit repair. Many of our borrowers are just told NO by banks and other lenders because they currently do not qualify but can qualify quickly. 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.
We help many borrowers with credit scores down to 500 FICO get approved for VA loans.
Fannie Mae and Freddie Mac require a 620 credit score to qualify for Conventional loans.

Gustan Cho Associates has Jumbo Loan Programs down to a 600 credit score.

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Credit Disputes During The Mortgage Process

Borrowers cannot have credit disputes during the 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 to be in credit dispute without retracting it. However, credit scores will drop when the disputes are retracted.

Borrowers who have their public records, such as bankruptcies 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 third-party national public records search through Data Verify, Lexis Nexis, or other third-party servicers.

Removing collections, late payments, and charge-offs will not be a problem, but borrowers will have issues when public records get deleted from their credit reports.

Minimum Mortgage Lending Guidelines

We have no mortgage overlays on government and Conventional loan programs. As long as the borrower is approved/eligible per DU FINDINGS or LP FINDINGS and the borrower can meet the automated approval conditions, closing the loan should be no issue.

Here are the basic mortgage lending requirements:

To qualify for a 3.5% down payment FHA Loan loan on a home purchase, the minimum credit scores require 580 FICO. For those with credit scores between 500 to 580 FICO, a 10% down payment is required. For borrowers with credit scores lower than 580 FICO who cannot put 10% down payment, we will help get credit scores over 580 FICO to qualify for a 3.5% down payment to purchase a home loan.

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HUD Guidelines on Collection Accounts

Homebuyers can qualify for an FHA loan with outstanding collection accounts. 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 accounts, which will drop credit scores.

HUD Guidelines With Prior Bankruptcy

There is a two-year waiting period from the bankruptcy discharge date to qualify for an FHA loan after the Chapter 7 Bankruptcy discharge date. Borrowers can qualify for FHA and VA loans one year into their Chapter 13 Bankruptcy Repayment Plan. There is no waiting period after the Chapter 13 Bankruptcy discharge date on VA and FHA Home loans.

HUD Guidelines on Foreclosure and Deed-In-Lieu of Foreclosure

Homebuyers can qualify for an FHA loan with a prior foreclosure or deed-in-lieu-of foreclosure: There is a three-year waiting period after the recorded foreclosure date or deed-in-lieu of foreclosure to qualify for an 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.

FHA Loans After 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 short sale date, 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.

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FHA Loans With Judgments and Tax Liens

Many mortgage lenders will reject you if they have an unsatisfied judgment or tax lien unless you can pay them off before the loan application.

The team at Gustan Cho Associates can help borrowers get a mortgage loan with unsatisfied judgments and tax liens.

Borrowers can get a payment agreement with the judgment creditor or the Internal Revenue Service. Need to provide three months’ canceled checks that have been paid to the judgment creditor or IRS or have the judgment or tax lien paid in full at closing.

HUD Guidelines on Gap in Employment

Borrowers can have gaps in employment in the past two years and still qualify for a residential mortgage loan.

Borrowers who have been unemployed for six months or less only need 30 days of paycheck stubs with the new employer to qualify for a residential mortgage loan. Borrowers who have been unemployed for six or more months must be on the new job for at least six months to qualify for a residential mortgage loan.

You do not have to have a two-year job history requirement on the same job to qualify for an FHA loan. You can have a gap in employment in the past two years and be eligible for an FHA loan approval.

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Can I Get Approved For FHA Loan With 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

HUD Guidelines on Recent Late Payments

Lenders have no issues with prior bad credit 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.

Chicago Home Loan With Bad Credit Due To Unemployment

The United States Department of Housing and Urban Development, also known as HUD, launched the FHA BACK TO WORK EXTENUATING CIRCUMSTANCES DUE TO AN ECONOMIC EVENT mortgage loan program on August 15, 2013. Due to an Economic Event mortgage loan program, the FHA Back to Work Extenuating Circumstances shortens the waiting period to one year after a person has had a bankruptcy discharge, had a foreclosure, deed-in-lieu-of foreclosure, or short sale.

The mortgage loan applicant needed to be qualified because they needed to have been unemployed or underemployed for at least six months. The mortgage loan applicant needed to have a reduction of their household income of at least 20%. This economic event had led them to file bankruptcy or was the reason for going through the foreclosure, deed-lieu-of foreclosure, or short sale.

The FHA Back to Work mortgage loan applicant needs 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 must 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.

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Chicago VA Loans With Bad Credit

VA Loans are the best mortgage programs but are limited to veteran borrowers with a certificate of eligibility. Gustan Cho Associates are experts in the origination of Chicago VA loans with bad credit.

VA Loans With Bad Credit Loan Programs

Gustan Cho Associates has no lender overlays on VA loans. The team at Gustan Cho Associates has helped thousands of homebuyers close on their VA loan with credit scores down to 500 FICO. Here are some of the main bullet points of VA loans:

100% Financing
100% loan to value on VA Loans
No minimum credit score requirements on VA loans
No maximum debt-to-income ratio cap with an AUS approval
Manual underwriting
Minimum credit scores down to 500 FICO.
Veterans under 580 FICO may qualify with compensating factors
4% sellers concessions allowed on VA Loans

VA Refinance Mortgage with no appraisal, credit, or income verification: IRRRL.

Other Traditional Chicago Home Loan With Bad Credit at Gustan Cho Associates

Types of Mortgage Loan Programs

Gustan Cho Associates has hundreds of mortgage loan programs through its lending partnerships with over 210 wholesale mortgage lenders. Below are the available mortgage loan programs available for our clients: