Mortgage Approval With Low Credit Scores And Poor Credit

This Article Is About Qualifying And Getting Mortgage Approval With Low Credit Scores And Poor Credit

Gustan Cho Associates are experts in helping homebuyers get mortgage approval with low credit scores and poor credit. Not all mortgage companies have the same credit score requirements on FHA, VA, USDA, and conventional loans. All lenders need to meet the minimum agency guidelines including credit score requirements on government and conventional loans. However, individual lenders can have higher lending requirements called lender overlays on FHA, VA, USDA, and conventional loans. This is why just because a borrower does not qualify for a mortgage from one lender does not mean they do not qualify for a mortgage at a different lender with no lender overlays.

It is very important for borrowers to understand the basic agency mortgage guidelines. If the borrower knows they meet the minimum agency guidelines on a particular loan program, they will qualify for a mortgage with a lender with no lender overlays. Gustan Cho Associates has no lender overlays on government and conventional loans. Over 75% of our borrowers at Gustan Cho Associates are folks who could not qualify at other lenders or get a mortgage loan denial due to that lender’s overlays. All of our pre-approvals at GCA Mortgage will close. In this article, we will discuss and cover getting mortgage approval with low credit scores and poor credit.

Mortgage Approval With Low Credit Scores And Poor Credit: Understanding The Importance Of Credit Scores

Mortgage Approval With Low Credit Scores And Poor Credit

Mortgage agencies have minimum credit score requirements. However, individual lenders can have their own credit score requirements that are higher than the minimum credit score requirement required by HUD, VA, USDA, Fannie Mae, and Freddie Mac. The higher credit requirements required by lenders that are above and beyond the minimum agency requirements are called lender overlays. For example, HUD, the parent of FHA, requires a 580 credit score for borrowers to qualify for a 3.5% down payment FHA loan.

Most lenders may require a 620 or 640 credit score for borrowers on FHA loans even though HUD only requires a 580 credit score. The higher credit score requirement by lenders is called lender overlays. HUD allows borrowers with under 580 credit scores and down to a 500 FICO to be eligible for an FHA loan. However, any borrower with under 580 FICO needs to put a 10% down payment. The minimum credit score on conventional loans is 620 FICO. VA does not have a minimum credit score requirement but most lenders will have their own credit score requirements on VA loans.

Understanding The Difference Between Agency Guidelines Versus Lender Overlays

Most lenders will not approve borrowers under 580 credit scores even though HUD allows borrowers with credit scores down to a 500 credit score to be eligible on FHA loans. Lenders do not have to abide by the minimum HUD agency guidelines on FHA loans. They can have higher lending requirements. Lenders can have lender overlays on just about anything. For example, you do not have to pay outstanding collections and/or charged-off accounts to qualify for government and/or conventional loans. However, this requirement is dependent on each individual lender.

A lender can require borrowers to have outstanding collections and charged-off accounts be paid even though agency guidelines do not require borrowers to have them paid. This is why it is very important for borrowers with lower credit scores and poor credit to understand what the minimum agency guidelines are. The good news is Gustan Cho Associates does not have any lender overlays on government and conventional loans. We just go off the minimum agency mortgage guidelines with zero lender overlays. Over 75% of our borrowers at GCA Mortgage are folks who could not qualify at other lenders due to that mortgage company’s lender overlays.

Mortgage Approval With Low Credit Scores: The Ability To Repay

Mortgage Approval With Low Credit Scores

Gustan Cho Associates can help borrowers get mortgage approval with low credit scores and poor credit. We are experts helping borrowers with FHA and VA loans with credit scores down to 500 FICO. Borrowers can get mortgage approval with low credit scores and poor credit. You can have outstanding collections and charged-off accounts. However, you need timely payments in the last 12 months to qualify for a mortgage loan. Lenders fully understand people can go through financial hardships due to unemployment, loss of business, illness, divorce, or other extenuating circumstances.

Mortgage underwriters want to know why the borrower had periods of bad credit. Letters of explanation on why they defaulted on their debts will be required. However, lenders want to see borrowers have re-established themselves and are able to make their new mortgage payments timely. The ability to repay their new mortgage loan is one of the main factors mortgage underwriters will focus on when underwriting a loan. Compensating factors will be very helpful for borrowers with prior bad credit and lower credit scores.

Mortgage Approval With Low Credit Scores: The Importance Of Timely Payments In The Past 12 Months

Timely payments in the past 12 months are crucial. FHA and VA loans are the only two loan programs that allow manual underwriting. In general, 24 months of timely payments are required on all manual underwrites. However, Gustan Cho Associates can accept timely payments in the past 12 months on FHA and VA manual underwriting. Borrowers can qualify for a mortgage after bankruptcy and/or foreclosure.

Borrowers should never be late on any payments after bankruptcy and/or foreclosure. Lenders view borrowers with late payments after bankruptcy and/or foreclosure as second offenders and will not approve any borrowers with late payments after bankruptcy and/or foreclosure. Again, Gustan Cho Associates can help borrowers with late payments after bankruptcy and/or foreclosure qualify for a mortgage depending on the type of circumstances. We are very open-minded and are experts in helping borrowers with prior bad credit and low credit scores.

Types Of Bad Credit By Mortgage Applicants

Bad Credit By Mortgage Applicants

As we mentioned earlier, it is alright to have had prior bad credit and low credit scores. Outstanding collections and charged-off accounts do not have to be paid off to qualify for government and/or conventional loans. The key in getting mortgage approval with low credit scores and bad credit is to have timely payments for the past 12 months. No late payments after bankruptcy and/or foreclosure.

Here are the types of bad credit you can have and get mortgage approval with low credit scores and prior bad credit:

  • Have credit scores down to 500 FICO on FHA, VA, USDA loans
  • Fannie Mae and/or Freddie Mac require a minimum credit score of 620 FICO on conventional loans
  • Borrowers can qualify for non-QM loans with credit scores down to a 500 FICO
  • Timely payments in the past 12 months
  • Can qualify for a mortgage after bankruptcy and/or foreclosure after meeting the mandatory waiting period
  • No late payments after bankruptcy and/or foreclosure
  • No late payments on a mortgage payment in the past 12 months
  • Borrowers can have outstanding collections and/or charged-off accounts

At Gustan Cho Associates, we always find ways and solutions to help our clients. We have loan non-QM loan programs that allow borrowers with late payments in the past 12 months. Lower credit scores and recent late payments mean that lenders need to take on riskier borrowers. More risk for the lender means higher rates and more down payment required. Lower credit scores mean higher mortgage rates. The team at Gustan Cho Associates are experts in helping our clients rebuild and reestablish their credit scores. We have helped thousands of folks get their credit scores to over 700 FICO in less than one year after their Chapter 7 Bankruptcy discharged date. Homebuyers can qualify for FHA and VA loans during the Chapter 13 Bankruptcy repayment plan. There is no waiting period after the Chapter 13 Bankruptcy discharged date to qualify for FHA and/or VA loans. Gustan Cho Associates are experts in manual underwriting on FHA and VA loans. To qualify for a mortgage with low credit scores and poor credit, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Borrowers can email us at [email protected]gustancho.com. The team at GCA Mortgage are available 7 days a week, evenings, weekends, and holidays.

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