Late Mortgage Payment In Past 12 Months Lending Guidelines

This BLOG On Late Mortgage Payment In Past 12 Months Was UPDATED And PUBLISHED On October 25th, 2020

Qualifying for a home loan with Late Mortgage Payment in the past twelve months:

  • You can have prior bad credit, outstanding collections and charged offs, repossessions, or other prior derogatory credit tradelines and qualify for a mortgage as long as you have timely payments in the past 12 months
  • Lenders fully understand people can go through periods of bad credit due to extenuating circumstances such as loss of a job, loss of business, death in the family, or health issues
  • However, lenders want borrowers to have rebuilt and reestablished credit after period of bad credit
  • Borrowers can qualify for a mortgage after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale after meeting the minimum waiting period requirements
  • Government and conventional loans have minimum waiting period requirements after bankruptcy and/or after a housing event

Lenders want to see borrower have rebuilt and reestablished their credit after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, or period of bad credit. No late payments after bankruptcy, foreclosure, or period of bad credit. 

Borrowers Should Rebuild And Reestablish Credit During The Bankruptcy and/or Foreclosure Waiting Period To Qualify For A Mortgage

Borrowers have a mandatory waiting period requirement after bankruptcy and/or a housing event. However, just waiting out the waiting period does not automatically guarantee you that you will be eligible to qualify for a government or conventional loan. Lenders want to see rebuilt and reestablished credit after bankruptcy and/or a housing event with no late payments. The waiting period requirements depends on the particular home mortgage program.

  • Just waiting out the minimum waiting period does not automatically make you eligible for a home mortgage
  • Lenders want to see rebuilt and reestablished credit after bankruptcy and/or a housing event with no late payments
  • Late payments after bankruptcy and/or foreclosure is like a kiss of death
  • Most lenders will not accept borrowers with late payments and/or foreclosure
  • Lenders consider borrowers with late payments after bankruptcy and/or a housing event as second offenders which mean financially irresponsible borrowers
  • However, one or two late payments after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, or period of bad credit is not always a deal killer at Gustan Cho Associates
  • Gustan Cho Associates will approve borrowers with one or two late payments after bankruptcy and/or a housing event if they can get an approve/eligible per automated underwriting system (AUS)
  • Gustan Cho Associates is one of the very few national mortgage companies has no lender overlays on government and conventional loans
  • As long as the borrower can get an approve/eligible per automated underwriting system, we have no other lender overlays

Gustan Cho Associates just go off the findings of the automated underwriting system.

The Impact On A Late Mortgage Payment In The Past 12 Months

A late mortgage payment is the worst type of late payments you can have on your credit report.

Late Mortgage Payment

Most lenders want borrowers to be timely on all payments in the past twelve months:

  • This holds especially true on housing payments which include either rental and/or home mortgage payments
  • Under agency mortgage guidelines, mortgage applicants are allowed one 30 day late mortgage payment in the past 12 months and still get approved for a new mortgage
  • You cannot have more than one 30 day late mortgage payment and qualify for a new mortgage
  • For example, if you had multiple late payments on your mortgage payments on a house you just sold, you will not be able to qualify for a new mortgage until the date of last activity of the last time you paid your prior late mortgage payment has seasoned for at least 12 months

This often presents a problem for a homeowner who just sold their home and needs to qualify for a new mortgage to purchase another home.

Late Mortgage Payment: When Is A Mortgage Considered Late

Late Mortgage Payment needs to be avoided at all costs.

  • All mortgage payments are due on the 1st of every month
  • A late mortgage payment is considered is not considered late as long as it is paid by the last date of the month
  • This means the mortgage servicer will not report a borrower late on a mortgage payment that is due on the first of the month but is not received until the 31st of the month
  • However, if the mortgage servicer does not receive the mortgage payment until the 1st of the following month, the servicer will report the borrower 30 days late on their mortgage payment on all three credit bureaus

The mortgage servicing company will give borrowers a 15 day grace period without charging a late fee.

When Is A Mortgage Payment Considered Late And Reported To The Credit Bureaus

A late fee will be charged if the mortgage servicer does not receive the mortgage payment that is due for the month after the 15th of the month:

  • Even though the servicer charges a late fee for not receiving that month’s mortgage payment until after the 15th of the month, the servicer will not report the borrower late as long as the servicer gets that month’s mortgage payment within the 30 day period

Late mortgage payment will be reported on all three credit reporting agencies:

How Long Bad Credit Reports On Credit Bureaus

Derogatory credit tradelines remain on consumer credit reports for a period of 7 years from the date of last activity.

What is Late Mortgage Payment And Grace Period

This includes late payments, collections, charged-off accounts, judgments, repossessions, Chapter 13 Bankruptcy, foreclosures, tax-liens:

  • Chapter 7 Bankruptcy remain on credit bureaus for a period of 10 years
  • There may be extenuating circumstances why financially responsible consumers are late on their monthly debt payments
  • Some unexpected bills may have come up and consumers may be short of paying their mortgage payment and may need a little time
  • Before making late mortgage payment, contact the mortgage loan service
  • Talk to them if there are any arrangements that can be made without the servicer reporting a late mortgage payment on the credit bureaus
  • See if the mortgage company can give a one time reprieve where the mortgage loan servicer will not report 30 days late on the three credit reporting agency

Every lender have their own policies in reporting the payment history of their borrowers. Some lenders can work things out with borrowers when it comes to a late payment.

Grace Period Given By Creditors

Homeowners with a current home loan, their mortgage payment is due on the first of every month.

  • However, lenders will give a grace period of 15 days to pay mortgage payment
  • Will consider it on time as long as homeowners pay by the 30th and/or 31st of the month
  • Payments received on the 16th and up to the end of the month will be assessed a late charge
  • But will not be reported on the credit reporting agencies
  • Monthly late payment charges is normally 5% of the monthly payment amount due
  • Borrowers with only one late mortgage payment in a year and if paid before it is 30 or more days late, borrowers can request servicer if they can waive the late charge
  • Most lenders will waive one or two late charges per year for on time payers
  • If payment is not received by the 30th or 31st of the month and is received the following month, there will b a 30 day late payment that will be reported on credit report

This is what consumers want to avoid at all possible costs.

Credit Impact On Late Payments

As long as mortgage payments is not more than 30 days late, there will be no impact on credit.

What is one late mortgage payment in the last 12 months?

However, one late mortgage payment will definitely not only plummet credit scores but will have negative consequences in obtaining a home loan:

  • Derogatory credit will remain on credit report for a period of 7 years
  • If planning on obtaining a new mortgage loan but have late payments on credit report, borrowers cannot qualify for a home loan with late mortgage payments in the past 12 months
  • Some lenders will not accept any mortgage loan applicants who had a 30 day late mortgage payment in the past 24 months
  • Late mortgage is one of the worst negative credit items consumers can have on credit report
  • Will definitely affect borrowers when trying to qualify for another home loan
  • If homeowners were to sell current home and purchase a new home, they will not be able to qualify for a new home loan with multiple late payments history in the past 12 months on their home

This holds true even if homeowners have sold their home and mortgage balance has been paid off. The good news is Gustan Cho Associates can help borrowers with late payments in the past 12 months. As long as the borrower can get an approve/eligible per AUS, GCA Mortgage Group can originate and fund the loan.

One Late Payment In Past 12 Months

As mentioned earlier, many lenders have their own mortgage lender overlays when it comes to qualifying borrowers for a new mortgage loan with prior mortgage late payments. However, we can accept borrowers who had one late 30 day late payment on their home loan in the past 12 months. Some lenders will not accept any borrowers who had a mortgage late payment in the past 24 months or even 36 months. Mortgage late payments are taken extremely seriously by all lenders. Homeowners who had multiple late payments on their mortgage and recently sold their home, Gustan Cho Associates has alternative mortgage programs that can help you. Gustan Cho Associates has non-QM loan programs that can help borrowers on a new home mortgage with prior late payments in the past 12 months. Homeowners with a mortgage late payment needing to qualify for a home loan, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays. Borrowers can also email us at gcho@gustancho.com with any questions or want to go over any case scenarios.

2 Comments
  1. Gustan Cho, NMLS 873293 says

    You can have one late payments in the past 12 months and still get an approve/eligible per automated underwriting system on conventional and VA loans. HUD, the parent of FHA, allows up to two time 30 days late payments on a mortgage in the past 12 months and you can still get an approve/eligible per AUS.

  2. terry says

    i bought my home through owner financing in sep 28 2019. my first payment due oct 28 2019 paid with cash have receipts.missed dec 2019 payment.paid jan 2020 payment.then made 2 payments on feb 28 2020 for dec and feb.and all the rest on time.my question is could i pay jan and feb 2021 payments on feb 3 and have 12 months of on time payments?

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