FHA Guidelines On Late Payments After Bankruptcy

This BLOG On FHA Guidelines On Late Payments After Bankruptcy Was UPDATED On September 7th, 2017

Mortgage loan borrowers are often confused with FHA Guidelines On Late Payments After Bankruptcy due to being turned down for a 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 mortgage 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 is frowned upon 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 lender overlays.
  • The Gustan Cho Team at USA Mortgage has no lender overlays on government and FHA 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

FHA Guidelines On Late Payments After Bankruptcy And 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 mortgage 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 and 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 and borrowers have re-established credit since then borrowers should have no problem in getting a mortgage loan approval. 
  • However, borrowers who have a history of late payments and open collections throughout the years that shows that they are financially irresponsible and will have a hard time getting a mortgage loan approval. 
  • Borrowers who gone 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 re-establish 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 card holders deposit with them. 
  • For example, by putting a $500 deposit with the secured credit card company, the secured credit card company will get the card holder  $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 card holder 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 of 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, The Gustan Cho Team at USA Mortgage 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 1-800-900-8569 or text us at 262-716-8151 for faster response. We are available 7 days a week, evenings, weekends, and holidays.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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