This guide covers the frequently asked question is a 120-day mortgage late payment considered foreclosure.  One of the biggest fears for home buyers late on their mortgage payments in the past is the question Is 120 day mortgage late considered foreclosure? I get countless calls throughout the year from mortgage borrowers who were told they could not qualify for government or conventional loans. This is because they were told that any 120-day mortgage late considered foreclosure by other lenders.

I was curious about a borrower who went to a local mortgage broker and was told by the broker that the borrower needed to meet a 3-year waiting period from the date of last activity (DLA).

This was from the date the borrower became current from the 120-day mortgage late. This was in February 2017. The home was since sold and the borrower was ready to purchase a new home. I called the mortgage broker and was told that under HUD Guidelines, a 120-day mortgage late considered foreclosure. I told him absolutely not.

Is 120 Day Mortgage Late Considered Foreclosure

Nowhere in the HUD 4000.1 FHA Handbook does it state that a 120-day late payment on a mortgage is the same as a foreclosure or housing event? Long story short, I had one of my loan officers take the borrowers’ applications and end up closing on the loan. The answer to whether a 120-day mortgage late is considered Foreclosure is NO. Unless foreclosure proceedings start, HUD does not consider a 120 mortgage late, the same as a foreclosure.

Waiting Period to Qualify for Loans

There is no waiting period after 120-day mortgage late payments to qualify for FHA, VA, USDA, or Conventional loans. If you are told yes when asked If 120-day mortgage is a late considered foreclosure, contact us. If any borrowers are told that a 120-day mortgage late is considered foreclosure, contact us at Gustan Cho Associates, and we can get mortgage approval.  Speak With Our Loan Officer for Your Mortgage Loans

What is Considered an On-Time Mortgage Payment?

An on-time mortgage payment means paying your mortgage by the due date listed in your mortgage agreement or within the grace period, usually 10 to 15 days after the due date. During this grace period, you can pay without facing any late fees, which will still be considered on time. Payment made after this grace period is considered late and may result in a late fee.

Nonetheless, if the payment is made within 30 days of the due date, it will not impact your credit report as a late payment.

When it comes to being 120 days late on your mortgage, that’s a different story. Is 120 day mortgage late considered foreclosure? Being 120 days late usually means the lender can start foreclosure proceedings. You’ve missed four months of payments, and the lender can send a Notice of Default. This starts the pre-foreclosure process, and if the missed payments aren’t addressed, the lender might take legal steps to auction your property to recover the loan balance. So, it’s crucial to address missed payments as soon as possible to avoid reaching this stage.

Does Pre Foreclosure Normally Begin After at Least Months Delinquent?

Pre-foreclosure typically begins after a borrower has missed several consecutive mortgage payments. The time required can vary depending on the lender’s and state’s regulations. The procedure usually begins when a borrower is at least 90 days late, equivalent to missing three mortgage payments.

Here is a more detailed breakdown of the timeline:

1. 1-15 Days Late: A late fee is usually assessed if the payment is not made within the grace period (typically 15 days after the due date).
2. 30 Days Late: The lender will contact the borrower to notify them of the missed payment and request that it be made.
3. 60 Days Late: The lender will intensify their efforts to contact the borrower and demand payment for the missed payments.
4. 90 Days Late: This marks a crucial stage. The borrower usually receives a Notice of Default (NOD) from the lender, which officially starts the pre-foreclosure process. This notice notifies the borrower that they have defaulted and details the necessary amount to reinstate the loan.
5. 120+ Days Late: If the borrower does not resolve the default by this time, the lender may initiate formal foreclosure proceedings. The timeline and process for foreclosure vary by state and lender. The process usually requires legal action to sell the property and recoup the remaining loan amount.

During the pre-foreclosure period, borrowers still have options to avoid foreclosure, such as negotiating with the lender, seeking a loan modification, or selling the property. When encountering financial difficulties, borrowers must communicate with their lenders to explore all possible options.

Qualifying For Mortgage With Bad Credit

Like to clarify bad credit mortgage loans. Borrowers can qualify for mortgage loans with prior bad credit.

FHA is the most popular mortgage loan program in the United States for homebuyers with less-than-perfect credit and higher debt-to-income ratios, so we will mainly concentrate on FHA home loans in this blog. The United States Department of Housing And Urban Development (HUD) is the parent of the Federal Housing Administration (FHA). FHA is neither a lender nor has anything to do with originating and funding FHA loans.

FHA is a government organization under HUD whose role is to ensure and guarantee FHA Loans originated and funded by private financial institutions if borrowers default on the FHA loans and the property forecloses.

FHA insures and guarantees lenders of losses due to losses by foreclosures. For the loan to be insurable, lenders need to follow HUD guidelines. Outstanding late payments and charged-off accounts do not have to be paid to qualify for FHA Loans. However, lenders want timely payments in the past 12 months. One or two late payments in the past 12 months are not a deal killer. However, prior bad credit with outstanding collections, charged-off accounts, and late payments in the past 12 months will most likely render an approve/eligible per Automated Underwriting System (AUS).  Click here to Qualify for mortgage with bad credit

How Do Mortgage Underwriters View Late Payments

Late Payments can happen among the best of us. Mortgage Underwriters will need a letter of explanation of why mortgage borrowers were late:

• Was it for job loss?
• Was it due to a divorce?
• Was it due to other extenuating circumstances?

Periods of late payments are understandable. Lenders want to see borrowers have re-established credit after periods of bad credit. Special attention is given to the borrower’s payment patterns and behavior in the past 12 months. Past payment history is a good indicator of future payments on borrowers’ new mortgage payments. Borrowers can qualify for FHA Loans with one or two late payments in the past 12 months.

Is 120-Day Mortgage Late Considered Foreclosure: Late Payments After Bankruptcy & Foreclosure

Most lenders will not accept mortgage borrowers with late payments after bankruptcy, foreclosure, or other housing events. Most lenders consider any late payments after bankruptcy or housing event a second-time offender and will not accept anyone with any late payments period.

Late payments after bankruptcy or foreclosure is not a deal killer. I have helped countless borrowers who got automated approval findings after late payments after bankruptcy and foreclosure.

Do people not lose jobs after bankruptcy or foreclosure? People do not get sick and hospitalized after bankruptcy or foreclosure? Do people not get divorced after bankruptcy or foreclosure? Please get in touch with us at Gustan Cho Associates if told by lenders that they cannot accept you due to late payments after bankruptcy and foreclosure or other housing events.

Waiting Period After Loan Modification To Qualify For FHA Home Loans

We will cover a perfect case scenario explaining the answer to Is 120-Day Mortgage Late Considered Foreclosure. After a loan modification, there is a one-year waiting period to qualify for FHA loans. The one-year waiting period is mainly because, under HUD Guidelines, borrowers need 12 months of on-time payments on any mortgage payments to qualify for FHA loans and other mortgages.

The Team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays. Gustan Cho Associates has a national reputation for being a one-stop mortgage shop.

Most mortgage borrowers who went through a mortgage loan modification were at one time or another 120 days late on their mortgage payments before modification. Are all the 120-day late payers on their mortgages classified as having gone through foreclosure? Is 120-day mortgage late considered foreclosure?  The answer is NO, IT IS NOT.

Is 120-Day Mortgage Late Considered Foreclosure: Qualifying For Mortgage With Lender With No Overlays

Home buyers who need to qualify for a mortgage with a national mortgage company licensed in multiple states with no lender overlays on government or conventional loans can contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates has ZERO OVERLAYS on FHA, VA, USDA, and Conventional Loans. Gustan Cho Associates is a correspondent lender on non-QM loans and bank statement loans for self-employed borrowers.

There is no waiting period after foreclosure with non-QM loans. No tax returns are required on bank statements for mortgage loans for self-employed borrowers.

Besides not having any lender overlays on government and conventional loans, Gustan Cho Associates has dozens of non-QM wholesale mortgage lenders. If a mortgage loan program is available in today’s market, you can rest assured that Gustan Cho Associates has it available.  Qualify for mortgage with Lender with No Overlays

FAQs: Is 120 Day Mortgage Late Considered Foreclosure

• 1. Is 120-Day Mortgage Late Considered Foreclosure? No, a 120-day late mortgage payment is not considered foreclosure. According to HUD guidelines, foreclosure proceedings must be officially initiated to be considered a foreclosure.
• 2. What did the mortgage broker say about the 120-day late payment? The mortgage broker incorrectly informed a borrower that they needed a 3-year waiting period from the date of last activity (DLA) due to a 120-day late mortgage payment, treating it as equivalent to foreclosure. This information needs to be more accurate under HUD guidelines.
• 3. Can I qualify for a mortgage after being 120 days late? Qualifying for a mortgage is possible even after being 120 days late. There is no required waiting period to be eligible for FHA, VA, USDA, or Conventional loans after a 120-day late mortgage payment.
• 4. How does a 120-day late payment affect my mortgage application? A 120-day late payment does not automatically disqualify you from getting a mortgage. It is not considered a foreclosure unless foreclosure proceedings have started.
• 5. What is an on-time mortgage payment? An on-time mortgage payment is made by the due date listed in your mortgage agreement or within the grace period, typically 10 to 15 days after the due date.
• 6. What happens if I am 120 days late on my mortgage? If you are 120 days late, the lender can start foreclosure proceedings. This means they can send a Notice of Default, initiating the pre-foreclosure process.
• 7. Does pre-foreclosure begin after a certain number of missed payments? Yes, pre-foreclosure typically begins after a borrower has missed several consecutive payments, usually starting at 90 days late.
• 8. How many times can you skip a mortgage payment? Generally, you can’t skip a mortgage payment without consequences. However, forbearance or loan modification can provide temporary relief.
• 9. Can I qualify for a mortgage with bad credit? Yes, you can qualify for a mortgage with bad credit. FHA loans, for example, are available for homebuyers with less-than-perfect credit and higher debt-to-income ratios.
• 10. What should I do if I’ve been incorrectly informed about mortgage qualifications? Contact a knowledgeable mortgage advisor or lender, such as Gustan Cho Associates, who can provide accurate information and assist you in qualifying for a mortgage despite past late payments.

For further assistance, contact Gustan Cho Associates at 800-900-8569 or email gcho@gustancho.com.

This blog about Is 120 Day Mortgage Late Considered Foreclosure was updated on June 26th, 2024.