This BLOG On FHA Guidelines On Late Payments After Bankruptcy Was UPDATED And PUBLISHED On January 26th, 2020
Borrowers are often confused with FHA Guidelines On Late Payments After Bankruptcy due to being turned down for an FHA Loan if they have late payments after bankruptcy.
- Nothing on FHA Guidelines On Late Payments After Bankruptcy state that borrowers cannot qualify for FHA Loans with late payments after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale
- However, most lenders will automatically disqualify borrowers if they have any late payments after bankruptcy, short sale, deed in lieu, or foreclosure
- Late payments after bankruptcy and foreclosure are frowned upon by lenders as well as the Automated Underwriting System
- However, as long as mortgage applicants can get an approve/eligible per Automated Underwriting System, they should have no problem qualifying for FHA Loans with lenders with no overlays
- Gustan Cho Associates has no lender overlays on government and conventional loans
- Government Loans are mortgage loans insured and guaranteed by the government
The following are government-insured mortgage loans:
- FHA Loans
- VA Loans
- USDA Loans
In this article, we will cover and discuss FHA Guidelines On Late Payments After Bankruptcy.
Can I Qualify For FHA Loans With Late Payments After Bankruptcy
Many home buyers think that just because they have bad credit and outstanding collections that they do not qualify for a mortgage loan. This is absolutely not the case.
- Most banks do not want to touch any mortgage loan borrower with open collections or bad credit
- However, there are many lenders that will grant a mortgage loan approval with open collections or bad credit if the open collections and bad credit has been aged
- By aged, we are talking more than 12 months
- The older the open collections accounts and bad credit is, the less impact they will have on the borrowers’ credit scores
- Therefore the less impact in the mortgage underwriting processes
Get New Credit To Offset Bad Credit And Open Collections
When a mortgage lender underwrites a borrower’s mortgage loan application, the underwriter will see when the date of the last activity was on open collections accounts and late payments.
- As long as the outstanding collections, late payments, charge offs, and other bad credit items have been isolated to a certain time period and limited to that time period, it is possible for an approval
- Borrowers should have re-established credit after a period of bad credit
- With multiple timely payments after late payments, borrowers should have no problem in getting a mortgage approval
- However, borrowers who have a history of late payments and open collections throughout the years that shows that they are financially irresponsible will have a hard time getting a mortgage loan approval
- Borrowers who go through a period of financial hardship such as a job loss, divorce, or medical problems and it resulted in getting their credit bruised the best remedy is to start re-establishing credit by getting new credit
- Start developing a good payment history by adding new credit:
- Secured Credit Cards are the best tools for re-establishing credit
Obtaining New Credit With Bad Credit
This is a great question and dilemma most folks with bad credit and open collections have.
- How can one get new credit and reestablish new credit with low credit scores?
- The best route to take is getting secured credit cards
- Secured credit cards are like regular credit cards
- But consumers need to put a deposit down with the credit card company
- The secured credit card company will give the same amount of credit on the amount of money cardholders deposit with them
- For example, by putting a $500 deposit with the secured credit card company, the secured credit card company will get the cardholder $500 secured credit card limit
- I strongly recommend at least 3 secured credit cards with $500 credit limits
- Each one of these secured credit cards will boost credit scores by a least 20 to 40 points
- Credit scores will gradually increase as the cardholder develop timely payment history with these secured credit card companies
- Make sure they report to all three major credit reporting agencies
Re-Establishing Credit After Bankruptcy And/Or Foreclosure
I get countless calls by home buyers who cannot qualify for FHA Loans because they have a late payment or open collections after a bankruptcy and/or foreclosure.
- Again, FHA Guidelines On Late Payments After Bankruptcy does not automatically disqualify borrowers with late payments.
- As long as borrowers can get an approve/eligible, Gustan Cho Associates can proceed with the FHA Loan Process
- We are direct lenders with no lender overlays
- Letter of explanation with documented facts and reasoning behind late payments after Bankruptcy and/or Foreclosure will be required
Qualifying For FHA Loans With Late Payments After Bankruptcy
Home Buyers who were told that they do not qualify for FHA Loans with late payments after bankruptcy, foreclosure, short sale, or deed in lieu of foreclosure, please contact us at Gustan Cho Associates at 262-716-8151 or text for faster response. Or email us at firstname.lastname@example.org. We are available 7 days a week, evenings, weekends, and holidays.