Home Loan With Recent Late Payments Mortgage Guidelines

This Article Is About Home Loan With Recent Late Payments Mortgage Guidelines

For borrowers seeking to try to qualify for a home loan with recent late payments, an FHA loan is the best route to take.

  • FHA loans have extremely loose lending guidelines when it comes to prior bad credit

Borrowers can have the following types of bad credit and qualify for a mortgage:

  • bankruptcy
  • foreclosure
  • deed in lieu of foreclosure
  • collection accounts
  • judgment
  • tax liens
  • recent late payments
  • charge offs
  • low credit scores

In this article, we will discuss and cover Home Loan With Recent Late Payments Mortgage Guidelines.

Role Of FHAHome Loan With Recent Late Payments

The Federal Housing Administration fully understands that people have gone through periods of a hard time such as the following:

  • unemployment
  • loss of business
  • divorce
  • medical issues
  • other extenuating circumstances

The Federal Housing Administration, FHA, is under the direction of the United States Department of Housing and Urban Development, also referred to as HUD:

  • FHA is not a lender
  • They are a government entity that insures residential owner-occupant mortgage loans to lenders
  • Lenders need to be HUD-approved
  • Need to follow HUD guidelines in order for their FHA loans to be insured in case of default which leads to foreclosure and loss

HUD has created specific guidelines when it comes to Home Loan With Recent Late Payments.

Qualifying For Mortgage With Prior Bad Credit

Borrowers can qualify for FHA Loans with credit scores as low as 500 FICO.

  • However, if borrowers credit scores fall between 500 and 579, a 10% minimum down payment is required
  • HUD allows homebuyers to qualify for FHA Loans with as little as a 3.5% down payment
  • However, to qualify for a 3.5% down payment home purchase borrower needs a 580 minimum credit score
  • There are reasons why a mortgage loan applicant has credit scores under 640
  • Credit scores under 640 are considered poor credit scores

A mortgage loan application can have prior bad credit and qualify for a mortgage loan.

Qualifying For Mortgage With Outstanding Collections And Charge Offs

A mortgage applicant can have collection accounts with credit balances.

  • Borrowers do not have to pay off the credit balance in order to qualify for a mortgage loan
  • Charged off accounts do not matter and do not have to be satisfied

Qualifying For Mortgage After Bankruptcy And Housing EventQualifying For Mortgage After Bankruptcy And Housing Event

The mortgage loan applicant can have a prior bankruptcy and qualify for a mortgage loan:

There is a 2-year mandatory waiting period to qualify for an FHA loan from the date of the discharge of bankruptcy

  • Borrowers can qualify after foreclosure and /or after a deed in lieu of foreclosure after three years from the recorded date of the foreclosure and/or deed in lieu of foreclosure
  • A mortgage loan application can qualify for FHA Loans after 3 years from the short sale date of their property
  • A mortgage applicant can qualify with a judgment and/or tax lien
  • This holds true as longs as a written payment agreement is in effect
  • Mortgage loan applicant needs to show they have been making at least three payments by providing three canceled checks

The loan applicant can qualify for an FHA insured mortgage loan with prior charge offs. Outstanding charged-off accounts do not have to be paid to qualify for an FHA loan.

FHA Loan With Bad Credit

HUD is extremely generous when it comes to their mortgage guidelines for home buyers with prior bad credit.

  • PRIOR BAD CREDIT is the key phrase here and not recent late payments
  • FHA is extremely tough when it comes to recent late payments:
  • So are lenders
  • HUD does not condone home buyers or refinance mortgage loan applicants with any recent late payments
  • Most lenders will not approve loan applicant if they had a late payment in the past 12 months
  • However, if a loan applicant had just one or two late payments in the past 12 months, there is a possibility borrowers may get a pass

The most common problem most people who come to me to apply for a mortgage loan with recent late payments are folks who had a recent late payment on credit card bills.

Recent Late Payment On Credit Card Bills

90% of the recent late payments on a mortgage loan applicant cases I see are recent late payment on credit card payments.

  • That monthly minimum credit card payment is so important
  • Even if your minimum payment is $5 dollar
  • If you skip that $5 dollar minimum due payment and decide to pay off the entire credit card balance the following month, it will negatively affect credit scores
  • The credit card company will report 30 days late on the credit report
  • That late payment will stay on a credit report and be part of credit history for the next 7 years
  • That one $5 dollar late payment in the past 12 months can kill the chances of  getting a mortgage loan

The good news is that if you have one recent late payment such as a recent late payment on a credit card payment, there may be a solution where you can still qualify for a mortgage loan.

Contact Creditor For One Time ReprieveContact Creditor For One Time Reprieve

Mortgage Loan Applicants with a recent late payment on credit card payment, auto loan payment, or any other credit payment and this was the only late payment and had a good payment history with the creditor, contact the creditor and see if they will remove the recent late payment history as a one-time goodwill gesture.

Tell them nicely that it was a total oversight on the borrowers part:

  • That the recent late payment history is hindering chances of qualifying for a mortgage loan
  • Many times the creditor will check consumers overall payment history with them
  • They will make a one-time exception
  • They can remove the recent late payment history of the credit report
  • If the customer service representative tells the consumer that they cannot remove the recent late payment of their credit report, ask to speak to a supervisor
  • Many times when the customer service representative says no and when asked to speak to a supervisor, the supervisor may give consumer sympathy and take the recent late payment off their record
  • One recent late payment on the credit report can plummet credit scores by more than 50 plus points
  • Whether it is a $5 dollar minimum payment or a $400 dollar payment, the late payment will both impact credit scores the same

A late payment is considered a late payment period no matter how much the minimum monthly payment is.

Consult With Direct Lender With No Overlays With Home Loan With Recent Late Payments

When trying to qualify for Home Loan With Recent Late Payments, make sure to consult with a direct lender with no overlays on Home Loan With Recent Late Payments.

  • Most lenders will have lender overlays on Home Loan With Recent Late Payments

Even if borrowers get an automated underwriting system approval on AUS, lenders can disqualify borrowers for Home Loan With Recent Late Payments as part of their mortgage overlays.

Home Loan With Recent Late Payments: Research A Lender With No Lender Overlays

Instead of applying to a bank, consult with a mortgage lender with no overlays, and explain the recent late payment to the loan officer.

  • Mortgage brokers represent multiple lenders
  • But the issue with mortgage brokers is that they are not lenders and do not have control
  • Mortgage Brokers need to deal with a representative of a direct lender who in turn the rep needs to contact someone within the mortgage lender
  • Not all lenders will disqualify borrowers for Home Loan With Recent Late Payments

Gustan Cho Associates is a mortgage company licensed in multiple states with no overlays on government and conventional loans. Over 75% of our borrowers are folks who could not qualify with other lenders due to their overlays.

Letter Of Explanation For Home Loan With Recent Late Payments

For borrowers who had a recent late payment and you have found a lender that will take on your deal, the chances are that they will require a detailed letter of explanation.

  • The letter of explanation does not need to be a novel
  • It just needs to state the facts and if a borrower can provide supporting documents, it will be great to the borrowers’ advantage
  • One case scenario where I ran into a loan applicant with a recent late payment on his credit report was that the mortgage loan applicant did not use one of his credit cards for some time
  • Renewal time came and he did not realize that the renewal annual fee was $75 dollars and a minimum payment of $10 dollars was due
  • He did not think anything of it until he had to apply for a mortgage and the late payment history showed up on his credit report
  • This did a lot of damage and the credit card company would not remove the recent late payment record off his credit report
  • However, the mortgage loan applicant provided supporting documents along with a letter of explanation and everything was fine

All in all, one recent late payment will not disqualify you from getting a mortgage approval.  Multiple late payments all at the same time due to extenuating circumstances can also not bar you from a mortgage loan approval.  However, recent late payments throughout the past 12 months will definitely not qualify you for a mortgage loan.

Mortgage Borrowers who need to qualify for Home Loan With Recent Late Payments, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

Related> Late payments: Can I qualify for a mortgage loan?

Related> Recent late payments: Home loan with bad credit Related> Can I qualify for a mortgage with late payments?

1 Comment
  1. Donald Miller says

    I have a 583 fico middle score. I would like to use my va loan my income is 81000 a year my wife’s is 39000 which total out to 110000 a year for household. I’m also exempt from the VA funding fee. Is there anyway possible I can get approved because everyone else is telling me I need a 620 middle score after they already told me all I need is a 580 before they run my credit.

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