Chicago Home Loan With Bad Credit Mortgage Guidelines

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This ARTICLE On Chicago Home Loan With Bad Credit Mortgage Guidelines Was Updated And PUBLISHED On April 8th, 2020

What could be the wrong guidelines for a Chicago home loan

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

In this article, we will discuss and cover Chicago Home Loan With Bad Credit Mortgage Guidelines.

Qualifying For Chicago Home Loan With Bad Credit With Direct Lender With No Overlays

2019 brings some great residential mortgage loan programs for homebuyers seeking a Chicago home loan with bad credit.

  • Home Buyers who have been turned down from their local bank and/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 a 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 direct lenders with no lender overlays on government and conventional loans.
  • GCA Mortgage Group 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 Gustan Cho Associates Mortgage Group

Our team of loan officers at Gustan Cho Associates specialize in helping families realize the dream of homeownership become a true reality.

How Is It Possible To Get Mortgage When Bank Turned Me Down?

How Is It Possible To Get Mortgage When Bank Turned Me Down?

Banks and credit unions have tighter mortgage lending guidelines. To qualify for Chicago Home Loan With Bad Credit it is best to consult with a direct lender with no overlays.

  • 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
  • Gustan Cho Associates are experts in helping borrowers qualify for Chicago Home Loan With Bad Credit

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 set the standards for Conventional Loans. Let’s 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 an 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 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.

Agency Guidelines Versus Lender Overlays

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
  • GCA Mortgage Group 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 Qualify For Chicago Home Loan With Bad Credit

Who Can We Help Qualify For Chicago Home Loan With Bad Credit

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 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 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 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

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

Credit Disputes During The Mortgage Process

What do credit disputes mean during the mortgage process

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 get 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 require 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 a 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
  • Borrowers can qualify for FHA and VA Loans one year into their Chapter 13 Bankruptcy Repayment Plan
  • There is no waiting period after Chapter 13 Bankruptcy discharged date on VA and FHA Home Loans

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 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

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 the 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 canceled checks that have 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 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 need to be on the 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.

Chicago Home Loan With Bad Credit: About The FHA Back To Work Mortgage Program

Something more about the FHA "Return 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 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 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 Associates 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:

Gustan Cho Associates Mortgage Group at Loan Cabin Inc. has no overlays on VA Loans:

  • 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 Chicago Home Loan With Bad Credit At Gustan Cho Associates

what are the other traditional loan programs at Gustan Cho Associates

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

This BLOG On Chicago Home Loan With Bad Credit Was UPDATED On April 8th, 2020

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