How To Qualify For Home Loan With Bad Credit And Get Approved

This Article Is About How To Qualify For Home Loan With Bad Credit And Get Approved

Not all lenders have the same lending requirements on government and conforming loans. There are ways How To Qualify For Home Loan With Bad Credit. Just because a borrower gets denied by one lender does not mean that another lender will not approve them. Any borrower with 700 plus credit scores and low debt to income ratios can qualify for home loans at any lender. However, not everyone has perfect credit and high credit scores. Gustan Cho Associates Mortgage Group can show and help borrowers on How To Qualify For Home Loan With Bad Credit. GCA Mortgage is a mortgage company licensed in multiple states with no lender overlays on government and conventional loans.

Importance Of Mortgage Pre-Approvals

Importance Of Mortgage Pre-Approvals

Unfortunately, there are still mortgage companies where loan officers issue pre-approvals to home buyers. I cannot believe many loan officers issue pre-approval letters within an hour and homebuyers trust that pre-approval letters and enter into a real estate purchase contract. This is a disaster waiting to happen. Over 75% of our borrowers are folks who could not qualify at other mortgage companies due to their lender overlays. A large percentage of our borrowers are folks who got denied by other lenders due to their overlays.

There is no reason why borrowers should stress during the mortgage process or get a last-minute mortgage denial. The number one reason why borrowers stress during the mortgage process or get last-minute mortgage denials is due to the fact that loan officers did not properly qualify them. All pre-approvals should never be signed off by loan officers. GCA Mortgage Group closes 100% of all of our mortgage loans because all of our pre-approvals are fully underwritten and signed off by our underwriters. Loan Officers can issue pre-qualification letters but never pre-approvals. All pre-approvals are loan commitments to lend and should be fully underwritten by mortgage underwriters.

How Mortgage Markets Work

Government Loans are FHA, VA, USDA Loans. Conventional Loans are called conforming loans because they need to conform to Fannie Mae and Freddie Mac Guidelines. Conventional Loans are not backed by any government agency nor is it insured like FHA, VA, USDA Loans. So why do conventional loans have to conform to Fannie Mae and Freddie Mac Guidelines?

The Federal Housing Finance Agency is the government agency that regulates Fannie Mae and Freddie Mac. The Role of Fannie Mae And Freddie Mac is to create liquidity by purchasing mortgages from private lenders. Lenders use their warehouse line of credit to fund conventional loans. Once they close and fund the conforming loans, they want to sell them to Fannie Mae and Freddie Mac.

In order for Fannie Mae and Freddie Mac to purchase conventional loans by private lenders, they need to conform to Fannie/Freddie Guidelines. If home loans funded do not conform to Fannie/Freddie Guidelines, these two GSE will not purchase them. Therefore, lenders are stuck keeping these loans in-house as portfolio loans. This is the main reason why conventional loans need to conform to Fannie Mae and/or Freddie Mac Guidelines. All government loans need to meet agency mortgage guidelines. If loans do not meet FHA, VA, USDA mortgage guidelines, the government agency will not insure them. If government loans are not insured, the secondary market will not purchase them.

First Step On How To Qualify For Home Loan With Bad Credit

There are steps in going about on How To Qualify For Home Loan With Bad Credit. GCA Mortgage Group are direct lenders with no overlays on government and conventional loans. Our team of licensed loan officers and support staff deal with home buyers with bad credit every day. Over 75% of our borrowers are folks who could not qualify at other lenders due to their lender overlays or because they were not properly qualified. Countless Americans were left financially devastated. Many filed for bankruptcy while a large percentage of Americans lost their homes through foreclosure and/or other housing events such as a short sale.

Many Americans never dreamed of becoming homeowners ever again. With the financial collapse came the loss of income which meant bad credit. Not all lenders have the same mortgage guidelines. HUD, VA, USDA, Fannie Mae, Freddie Mac all have the understanding that extenuating circumstances happen to hard-working folks. All lenders need to meet agency guidelines. However, most lenders have overlays. Lender overlays are additional lending requirements above and beyond agency guidelines. The best approach and advice on How To Qualify For Home Loan With Bad Credit is by researching a lender with no lender overlays on the particular loan program the home buyer wants to qualify. Gustan Cho Associates Mortgage Group does not have any lender overlays on government and conventional loans. GCA Mortgage has dozens of lending relationships with non-QM wholesale mortgage lenders. We not only are we mortgage bankers on government and conventional loans but we offer dozens on non-QM and alternative mortgage loan programs.

Choosing Direct Lender With No Lender Overlays

Choosing Direct Lender With No Lender Overlays

All lenders who originate and fund FHA Loans need to make sure all their borrowers meet HUD 4000.1 FHA Handbook Guidelines. Under HUD 4000.1 FHA Handbook, borrowers can qualify for FHA Loans with a 10% down payment with credit scores between 500 to 579. To qualify for FHA Loans with a 3.5% down payment, borrowers need to have 580 credit scores. However, many home buyers get turned down for FHA Home Loans by most lenders because they do not meet 620 to 640 credit score requirements although HUD only requires a 580 credit score. These extra higher credit score requirements are called overlays by the individual lender.

Lenders are allowed to have lender overlays that are above and beyond HUD Guidelines. There are countless overlays lenders can impose. Outstanding collections and charged-off accounts do not have to be paid to qualify for FHA Loans. However, lenders can impose that any outstanding collections and charged-off accounts be paid off. These are called lender overlays on collections and charged-off accounts. Gustan Cho Associates Mortgage Group has no overlays on FHA, VA, USDA, and Conventional Loans.

What Is Best Loan Program On How To Qualify For Home Loan With Bad Credit

The best loan program on How To Qualify For Home Loan With Bad Credit is FHA Loans. FHA Loans is the most popular loan program and the best way How To Qualify For Home Loan With Bad Credit. HUD, the parent of FHA, has a mission to promote homeownership to hard-working Americans with lower credit scores, credit issues, and low down payments. The role of FHA is to insure private lenders in the event of borrower default. Due to this government guarantee, private lenders can offer home loans for borrowers with bad credit at very low rates with a 3.5% down payment.

HUD Agency Mortgage Guidelines

Here are the basic HUD FHA Guidelines On How To Qualify For Home Loan With Bad Credit:

  • 580 credit scores for 3.5% down payment
  • Under 580 credit scores, borrowers need a 10% down payment
  • Outstanding collections and charged-off accounts do not have to be paid to qualify for FHA Loans
  • However, to get an approve/eligible per Automated Underwriting Findings, timely payments in the past 12 months is normally required
  • Two year waiting period after Chapter 7 Bankruptcy discharged date
  • Borrowers can qualify for FHA Loans after 12 months of payments into their Chapter 13 Bankruptcy Repayment Plan with Trustee Approval
  • No waiting period to qualify for FHA Loans after Chapter 13 Bankruptcy discharged date

Manual underwriting is required for borrowers in a Chapter 13 repayment plan and any Chapter 13 with less than two-year seasoning after the discharged date.

How To Qualify For Home Loan With Bad Credit With VA Mortgages

Qualify For Home Loan With Bad Credit With VA Mortgages

VA Loans is the best mortgage loan program in the United States. The Department of Veterans Affairs does not have a minimum credit score requirement nor does it have a maximum debt to income ratio.

Here are the benefits and requirements on How To Qualify For Home Loan With Bad Credit on VA Mortgages:

  • No minimum credit score requirements
  • No maximum debt to income ratio requirements
  • No down payment required
  • Outstanding collections and charged-off accounts do not have to be paid to qualify
  • However, to get an approve/eligible per Automated Underwriting Findings, timely payments in the past 12 months is normally required
  • Two year waiting period after Chapter 7 Bankruptcy discharged date
  • Two year waiting period after foreclosure, short sale, deed in lieu of foreclosure
  • Borrowers can qualify for VA Loans after 12 months of payments into their Chapter 13 Bankruptcy Repayment Plan with Trustee Approval
  • No waiting period to qualify for VA Loans after Chapter 13 Bankruptcy discharged date

Manual underwriting is required for borrowers in a Chapter 13 repayment plan and any Chapter 13 with less than two-year seasoning after the discharged date.

Qualifying For Home Loans With Bad Credit With Direct Lender With No Overlays

Home Buyers can qualify for home loans with prior bad credit. Prior is the keyword. GCA Mortgage Group does not expect borrowers to pay outstanding collections and charged-off accounts. Late payments are fine as long as they are caught up. However, timely payments in the past 12 months are key in qualifying for a home mortgage. To start the pre-approval and qualification mortgage process with a direct lender with no overlays, please contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for a faster response. Or email us at [email protected] We are available 7 days a week, evenings, weekends, and holidays.

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