FHA Loans With Recent Late Payments

This BLOG On Qualifying For FHA Loans With Recent Late Payments Was Written By Gustan Cho NMLS 873293

FHA Loans With Recent Late Payments?  Can I qualify for FHA Loan With Bad Credit? Can I qualify for FHA Loan with outstanding collections and charge off accounts without having to pay them? The answer to this question is yes to qualifying for FHA Loan with bad credit.

  • It is possible to get a home loan with bad credit in most circumstances but there are situations where not everyone is able to qualify for a home loan with bad credit. 
  • For example, you can have good credit scores but if you have had recent late payments on your credit report, then that may pose a problem. 
  • You can still qualify for a home loan with bad credit and recent late payments.  
  • What are recent late payments? 
  • Mortgage lenders view recent late payments as any credit payment obligations in the past 12 months.  
  • Mortgage lenders really frown on mortgage loan applications that has a multiple recent late payments in the past 12 months. 
  • One or two recent late payments with a strong letter of explanation is not a problem but if you have been late on multiple late payments in the past 12 months, then it can pose a problem in you qualifying for a residential mortgage loan. 
  • Just qualifying with the minimum credit score will not get you a residential mortgage loan approval. 
  • For example, to qualify for a 3.5% down payment purchase FHA loan, the minimum credit score required is 580 FICO. 
  • People can have a 580 FICO score but if you had 3 late payments in the past three months without any valid reason, you may have a problem qualifying for a residential mortgage loan.

What Happens If I Got Multiple Recent Late Payments?

If you have a bunch of recent late payments, there are potential solutions. FHA is very lenient in setting up FHA Guidelines with bad credit but do not want to see borrowers who have a habit of not paying their bills timely. You can qualify for FHA Loans With Recent Late Payments but lenders want to know the reason why you were late.

  •  If you have been always timely with your creditor and it was a one time late payment, then you may try contacting the creditor and beg them for mercy to get a one time deletion off. 
  • Many times creditors will do this as a one time favor for their clients. 
  • However, if you have been a habitual late payer, then the chances will be zero to none to get the late payment record deleted off your credit report. 
  • In the event if the customer service rep denies you on your deletion request, ask to speak with a supervisor. 
  • In the event that your creditor does not remove the recent late payments off your credit report, then you may have to wait at least six months of timely credit payment history.

One Late Payment In Past 12 Months

Mortgage lenders will most likely allow one or two late payments in the past 12 months.

  • Most of them will allow one late payment in the past 6 months only with a solid letter of explanation. 
  • A good excuse would be that you forgot to pay the annual membership fee of your credit card and your credit balance was zero but due to them charging the annual $35.00 membership fee on your credit account, you did not realize that you still had to pay the bare minimum $10.00 monthly required credit card payment. 
  • This excuse will fly with most mortgage loan underwriters. 
  • However, a letter of explanation stating that you forgot to make your monthly credit payments will only show that you are financially irresponsible to the mortgage loan underwriter.

Recent Late Payments And Mortgage Approval

Just because you had recent late payments does not automatically disqualify you for a residential mortgage loan.

  • Many mortgage lenders do have their own overlays when it comes to recent late payments. 
  • However, if your mortgage broker can submit your mortgage loan application and credit report to either Fannie Mae’s or Freddie Mac’s Automated Underwriting System and you get an approve/eligible per DU or LP FINDINGS, then you are set to go with a mortgage lender with no lender overlays. 
  • There are many mortgage brokers who represent wholesale mortgage lenders with no mortgage lender overlays and will just go off the automated approval findings.

Late Payments After Bankruptcy And Foreclosure

If you had recently gone through a recent bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale, please make sure you religiously pay all of your monthly credit payments on time and never be late.  Most mortgage lenders do not want to approve a mortgage loan application with late payments after a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale.  Most mortgage lenders want to see the mortgage loan applicant with re-established credit and no late payments after they have gone through their bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale.  The best way to re-establish your credit is by getting three to five secured credit cards with at least $500 credit limits.  The higher the credit limit of your secured credit card the better. If you have bad credit, each one of the secured credit cards you get will definitely boost your credit scores and your credit scores will eventually improve as your credit cards ages with time.

Choosing A Lender With No Overlays For Borrowers Who Need To Qualify For FHA Loan With Recent Late Payments

Nobody can give you a yes or no answer to the question “Can I Qualify For FHA Loans With Recent Late Payments”. However, not every lender will have the same underwriting guidelines. Every lender has their own mortgage guidelines called lender overlays and some lenders are tougher than others when it comes to approving FHA Loans with Recent Late Payments. Just because you meet FHA Guidelines and get an approve/eligible per Automated Underwriting System does not mean that you will qualify for a FHA Loan especially FHA Loans with recent late payments. There is nothing on the HUD 4000.1 FHA Handbook that states that borrowers do not qualify for FHA Loans with recent late payments. The great news is that The Gustan Cho Team at CrossCountry Mortgage Inc. NMLS 3029 has no overlays and if you get an approve/eligible per automated findings, we will approve your FHA Loan even with recent late payments. However, lenders with overlays will leave that decision up to the mortgage underwriter and the chances are that they will most likely deny you. If you have recent late payments and need to qualify for a FHA Loan, please call Gustan Cho NMLS 873293 of The Gustan Cho Team at CrossCountry Mortgage NMLS 873293 at 262-878-1965 or text Gustan Cho on his cell at 262-716-8151. You can also email us at gcho@gustancho.com.

Gustan Cho


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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