Can I Qualify For FHA Loan With Recent Late Payments

This Article Is About Advice In Qualifying For FHA Loan With Recent Late Payments

One of the most common  inquiries I get on a daily basis is if you can qualify for FHA Loan With Recent Late Payments.

  • You can qualify for an FHA loan with outstanding collections and charged off accounts
  • You do not have to pay outstanding collections and/or charged off accounts and still qualify for an FHA loan as long as you can get an automated approval per AUS
  • You can qualify for an FHA loan with a prior bankruptcy, foreclosure, deed in lieu of foreclosure, short sale after meeting the waiting period requirements as long as you can get an approve/eligible per automated underwriting system (AUS)
  • You can qualify for an FHA loan with credit scores down to 500 FICO
  • This holds true as long as you can get an approve/eligible per AUS
  • The key in getting an approve/eligible per automated underwriting system is to be timely on all your payments in the past 12 months

Lenders and the automated underwriting system closely review the borrower’s payment history with strong emphasis timely payments in the past 12 to 24 months.

Importance Of Timely Payments In The Past 12 Months

FHA Loan With Recent Late Payments

Most lenders will not accept any mortgage loan applicants who had any late payments in the past 12 months:

  • This holds even with an automated underwriting system (AUS) approval
  • Majority of lenders with not accept any borrowers with late payments after Bankruptcy and/or Housing Event (Foreclosure, Short Sale, Deed In Lieu Of Foreclosure)
  • This holds true even with an AUS Approval
  • Lenders frown upon borrowers with late payments after bankruptcy and/or foreclosure 
  • Borrowers with late payments after bankruptcy and/or a housing event are considered a second offender
  • The good news is that qualifying for FHA Loan With Recent Late Payments is doable with a lender that has no lender overlays on FHA Loans

Gustan Cho Associates is a national mortgage company licensed in multiple states with no lender overlays on government and conventional loans. The team at Gustan Cho Associates has helped many borrowers qualify for FHA Loan With Recent Late Payments as well as late payments after bankruptcy and foreclosure.

Positive Credit After Recent Late Payments

The best way to qualify for FHA Loan With Recent Late Payments is for the late payment to season.

  • Again, most lenders want to see timely payments in the past 12 months
  • However, one or two late payments in the past 12 months is not a deal killer
  • This holds true as long as the borrower can get an Approve/Eligible per AUS

Bad Credit And Recent Late Payments

FHA Loan With Recent Late Payments: Place Yourself On The Lenders Side

The best chance of getting an AUS Approval is to have positive re-established credit after the date of the last activity of the late payment:

  • Lenders do understand borrowers can have had periods of bad credit because of extenuating circumstances

Examples of extenuating circumstances are the following:

  • due to loss of business
  • loss of employment
  • divorce
  • medical reasons

However, lenders want to see borrowers has recovered from the periods of bad credit:

  • Lenders want to see borrowers have re-established credit and not have any late payments after the period of bad credit
  • Majority of lenders will not approve any borrowers who has had any late payments after a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale
  • Majority of lenders do not want to see any late payments in the past 12 months
  • A large percentage of lenders will want to see timely payments on all of the credit tradelines for a period of 24 months
  • Just because a borrower has the minimum credit score does not mean borrower will qualify for an FHA Loan
  • If the borrower has a credit score of over 640 plus FICO credit score but has a few late payments in the past 12 months, the borrower may not qualify for an FHA Loan
  • Borrowers with lower credit scores but timely payment history in the past 12 months have a better chance of qualifying for an FHA loan than borrowers with higher credit scores but late payments in the past 12 months
  • One or two late payments in the past 12 to 24 months is not good but not always a deal killer
  • The answer to the question if borrowers can qualify for FHA Loan With Recent Late Payments, the answer is yes

However, the deal needs to make sense. We will go over the case scenarios on how to qualify for an FHA Loan With Recent Late Payments on this blog.

FHA Loan With Recent Late Payments: Place Yourself On The Lenders Side

Having a late payment in the past 12 months will not disqualify you from getting an FHA Loan.

  • However, timely payments in the past 12 months are viewed favorably and any late payments in the past 12 months will be scrutinized by lenders
  • To qualify for a 3.5% down payment FHA home purchase mortgage loan, the minimum credit score required is 580 FICO
  • A 580 credit score is considered a very low credit score
  • If your credit scores are 580 FICO, the chances are that most lenders will want you to have timely payments for the past 12 months
  • However, if borrowers have a higher credit score, like credit scores over 640 FICO and had one late payment in the past 12 months, that should be no problem in getting an automated approval
  • However,  borrowers with marginal credit scores, like 580 credit scores with more than one 30 day late payments in the past 12 months, that can become an issue
  • Borrowers may need to wait until the late payment has been seasoned
  • I have recently closed on a borrower who was just out of a Chapter 13 Bankruptcy discharge
  • The borrower had a recent 30-day mortgage late payment on her credit report and ended up closing her FHA home loan
  • A mortgage late payment in the past 12 months is really frowned upon by lenders
  • This borrower also had a late payment on her car payment during the Chapter 13 Bankruptcy repayment period
  • Why was I able to get this borrower mortgage loan approved and closed?
  • Because this borrower had compensating factors and her credit scores were over 650 FICO credit scores

The borrower had plenty of reserves and had verification of rent.

How To Get An Approval On FHA Loan With Recent Late Payments

How To Get An Approval On FHA Loan With Recent Late Payments

Mortgage borrowers can qualify for FHA Loan With Recent Late Payments, however, the deal needs to make sense:

  • Place yourself as a lender and if a borrower were to come to you with prior bad credit
  • But has re-established themselves and has proven themselves that they have been paying all of their bills timely since they have recovered
  • You will most likely feel comfortable in giving them a loan
  • However, if a borrower comes to you for a loan and has been late with their payments in the past twelve months, would you lend them the money?
  • Some of the questions you may ask and concerns you may have is why were they late?
  • One recent late payment may be acceptable with a good letter of explanation but what if the borrower had multiple late payments recently and was employed

Would you feel comfortable lending the applicant your hard-earned money?

FHA Loan With Recent Late Payments: Solutions

Mortgage Borrowers who had recent late payments in the past 12 months, there may be solutions.

  • Borrowers who were late on a credit card payment with good payment history may try to contact them to see if they can give a one time break
  • See if the creditor will take the late payment history off the credit report
  • Same with any other creditor such as an auto loan lender or installment loan lender
  • Many times, creditors will give consumers a one time break
  • Creditors may remove the late payment of the consumer credit report
  • Borrowers had multiple late payments in the past 12 months may need to wait at least six months before applying for a mortgage loan

Borrowers who need to qualify for FHA Loan With Recent Late Payments with a direct lender with no mortgage lender overlays, please contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates are available 7 days a week, evenings, weekends, and holidays.

11 Comments
  1. Richard K. says

    Do you do fha loans in nj?

    1. Gustan Cho, NMLS 873293 says

      Yes we do. We are licensed in NJ.

  2. Ikyshia says

    I live in illinois and recently had a chapter 13 discharged. I was approved for a 140 thousand dollar loan , however it feel through. My question is I”ve had a couple late credit card payments since the pandemic hit, can you tell me my chances of getting approved for another FHA loan?

    1. Gustan Cho, NMLS 873293 says

      Depends on the extenuating circumstances. In general, you cannot have late payments during Chapter 13 bankruptcy repayment period for the past 24 months.

  3. Maria Lawrence says

    I am on chapter 13 program and made it through underwriting up to the point with a closing date that got moved 3 times now. The lender is very understanding to my situation, it just I have late payments showing on my chapter 13 in the past 12 months. My attorney had provided a letter that there are some delay on posting dates to the trustee and the lender accepted the letter and was able to move on to the loan process. I have applied for moratorium for 3 mos. During the pandemic shutdown. I was approved for 215k and the court approved me to incur a debt. The closing got delayed again due to HUD requesting my payment history to approved my loan. I am now a bit alarmed that my loan will not pass through the HUD review and this might be the end of my home purchase journey.
    What are my chance of getting this loan being approved? Do you have a client that dealt with the same situation in the past?

    1. Gustan Cho, NMLS 873293 says

      We are experts in handling your type of situation. Please reach out to us at gcho@gustancho.com or call us at 262-716-8151. Or text us for a faster response. What state are you in?

  4. Dan follis says

    I live in mass bur looking to move to New Hampshire would you be able to help. Have some late fees but have been no late fees for 12 months

    1. Gustan Cho, NMLS 873293 says

      Unfortunately, we are not licensed in New Hampshire yet. I will refer you to my Associate George Makoutz. Please contact George Makoutz at 410-598-5296

  5. Megan May

    Buying condo in Florida where I transferring jobs. Have a VA loan now but have 2nd tier entitlement where I am going to rent out the house here. Middle credit score is 597. Salary $55k plus $1778 per month VA disability at 70%.

  6. Tynisha W says

    First time Homebuyer credit score barely made it and got me qualified but have 1 late payment for a self lender account that I didn’t need. That one account has me late great payment history on everything else. I feel like my hard work has stopped because of one account. Do you service alabama

    1. Gustan Cho, NMLS 873293 says

      One late payment may be okay. We service Alabama. Please reach out to us at gcho@gustancho.com. Or call us at 262-716-8151 or text us for a faster response.

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