Good Credit But Recent Late Payment: Would I Qualify For Mortgage?

Credit And Mortgage Qualification

There are minimum credit score requirements to qualify for a residential mortgage loan.  To qualify for a FHA residential mortgage loan, the minimum credit score required is 530 FICO.  Home buyers with credit scores between 530 FICO and 579 FICO, a minimum of 10% down payment is required.  To qualify for a FHA loan with a minimum 3.5% down payment, a home buyer needs a 580 FICO credit score.  To qualify for a conventional loan, the minimum credit score needed is 620 FICO.  To qualify for a VA loan, minimum credit score that is required is 530 FICO.  To qualify for a Fannie Mae HomePath mortgage loan, the minimum credit score required is 660 FICO.  Jumbo mortgage loan borrowers need minimum credit scores of 680 FICO or higher.  Condotel and non-warrantable condominium mortgage loan borrowers need a minimum of 680 FICO credit scores.

Borrower’s Credit History

Although the above are mandatory minimum credit scores for the particular mortgage loan programs, all mortgage lenders will review the overall credit history of the mortgage loan borrower.  All mortgage lenders realize that mortgage loan applicants may had periods of bad credit and/or prior bad credit.  However, recent late payments, especially in the past 12 months can be a problem in getting a mortgage loan approval even if the mortgage loan applicant has higher credit scores.   A lower credit score mortgage loan applicant has a much better chance of getting a mortgage loan approval than a mortgage loan applicant with a much higher credit score but with recent late payments.

Late Payments: Recent Late Payment

A recent late payment that is reported on your credit report is any late credit payment that is 30 days old.  A late payment will be devastating and can lower a person’s credit score by 40 or more FICO points.  It does not matter how much the minimum monthly payment is, whether it is a monthly minimum payment of $5 dollars or $1,000 dollars, a 30 day late payment is considered all the same and it will drop your credit scores and will affect the way mortgage loan underwriters will view your credit profile which can affect the chances of your mortgage loan approval.  Most mortgage lenders have a mandatory policy that a mortgage loan applicant have been timely with paying their bills for the past 12 months, while other mortgage lenders want to see a 24 month on time payment history.  Banks and credit unions have the tougher guidelines when it comes to seeing a 24 month on time payment history.  Even though a mortgage loan applicant’s credit score is over 700 FICO, one late payment on their credit report can hurt the chances of them getting a mortgage loan approval.  If the mortgage loan applicant is seeking to do a refinance mortgage loan and has late payment history on their current mortgage in the past 12 months, the chances will be tough for them to get a new refinance mortgage loan and may have to wait until they have re-establish their on time payment on their mortgage for at least 12 months.  Most banks and credit unions require 24 months on time mortgage payment history.

Is It Possible To Get Mortgage With Recent Late Payment?

The chances of getting a mortgage loan approval with a bank with late payments in the past 12 months will be very slim.  However, mortgage bankers are more lenient when it comes to recent late payment.  One or two recent late payment at the same time in the past 12 months may be possible with a letter of explanation as of why you were late.  However, multiple and periodic recent late payment in the past 12 months will be a tough sell to a mortgage loan underwriter.  You can qualify with credit scores of over 620 FICO but if you have multiple recent late payment history, chances are that you need to wait until your timely payment history has been re-established.  You could have had dozens of late payment history for a year or two and if you have re-established your credit history for at least 12 months but have a lower credit score but meet the mandatory minimum credit score guidelines, you should have no problem in qualifying for a residential mortgage loan.  The mortgage underwriter will want a letter of explanation as of why you had late payment history and derogatory credit such as being out of work but once you got yourself credit re-established after you found full time employment, it will be a non-issue.

Solution To Recent Late Payment So I Could Qualify For Mortgage

There are potential solutions in taking steps in trying to get the recent late payment removed from your credit report.  First solution is to contact your creditor and see if they can give you a one time break and see if they can remove the late payment record.  If you had a history of paying your bills on time with the particular creditor and just got a recent late payment on your record, the chances are that the creditor may remove the recent late payment history.  If the representative on the phone says no to your request, ask to speak to a supervisor.  Please be as polite as possible and see if the supervisor will give you mercy and have the derogatory late payment removed for a one time deal.  You will be surprised on how many times a creditor will work with you.

Multiple Recent Late Payments

If you have had a history of paying your bills on time and you have multiple late payment history on your credit report but you have descent credit scores, you may encounter problems in qualifying for a mortgage loan.  However, you will be able to qualify for a mortgage loan if you start paying your bills on time.  Worst case scenario, you may have to wait one year of making your payments on time, however, there are mortgage lenders that will approve you will only a six month timely payment history.  No matter how small the monthly payment is, you need to pay your monthly credit payments on time.  One or two recent late payment can plummet your credit scores and will most likely delay your chances of getting a mortgage loan approval.

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