Poor Credit: Can I Get Mortgage Approval With Bad Credit?

Many consumers have had a period in their lives where they had financial hiccups due to such extenuating circumstances as job loss, business loss, divorce, medical issues, law suits  or other extenuating circumstances where they could not pay their pay bills and their credit scores had suffered.  Some folks were forced to file bankruptcy while others had to lose their homes through foreclosure.  Mortgage lenders understand that people go through financial problems and everyone who had a period of bad credit can qualify for a mortgage approval with bad credit.  I specialize in helping home buyers get mortgage approval with bad credit.  Unfortunately, not every person can get a mortgage approval with bad credit which I will explain in the next paragragh.

How Can I Get A Mortgage Approval With Bad Credit?

If you were a victim of the real estate and financial collapse of 2008 and lost your job or business, chances are that your credit scores have suffered because you could not pay your bills on time.  Chances are you fell behind and you may have late payments, charge offs, or even judgments.  Some might have bankruptcy and/or foreclosure while others just let the bad debt linger, hoping the collection agencies will not force a wage or bank account garnishment or take the matter to court for a judgment.

Home Loan With Bad Credit

If this is the case and you are now fully employed and your financial situation has stabilized, you can qualify for a mortgage loan and you can get a mortgage approval with prior bad credit.  You do not have to pay off old bad debt or charge offs.  Judgments is a separate matter and I will discuss on how to qualify for a mortgage loan with a judgement later and on later mortgage blogs.  One of the most important things that will secure you a mortgage approval with bad credit is that the mortgage lender wants to see re-established credit for at least one year and no late payment history nor overdrafts in the past year.

Minimum Credit Scores Needed To Qualify For Mortgage Approval With Bad Credit

If you have credit scores between 530 FICO and 579 FICO, you need a 10% down payment to qualify for a FHA mortgage loan.  If your credit scores are between 580 FICO and 619 FICO,  the minimum down payment required is 3.5% but the maximum debt to income ratios are capped at 43% DTI.  If your credit scores are above 620 FICO,  minimum down payment is 3.5% but the debt to income ratio caps goes up to 56.9%.

Multiple Recent Late Payments

If you qualify with the credit score requirements but have a habit of recent late payments, there will be issues and mortgage lenders will require detailed letters of explanation as of why you have recent late payments.  Your payment history is a reflection on how financially responsible you are.

Mortgage Lender Overlays

Many mortgage lenders have what is called mortgage lender overlays.  Mortgage lender overlays are additional mortgage qualification requirements that a mortgage lender adds to the minimum FHA or Fannie Mae guidelines.  For example, you can qualify for a 3.5% down payment mortgage loan with bad credit with a credit score of 580 FICO, however, a mortgage lender may require a minimum credit score of 640 FICO in order for them to do the mortgage loan.  I represent dozens of wholesale mortgage lenders who will only require the bare minimum FHA or Fannie Mae required guidelines.  As long as you get an automated approval per Fannie Mae’s Automated Underwriting System, your mortgage loan will get approved in Illinois, Florida, California, Wisconsin, and Indiana.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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