Mortgage Lenders For Bad Credit in Arkansas With No Overlays

In this article, we will cover and discuss finding the best mortgage lenders for bad credit in Arkansas to qualify for a home loan as first-time homebuyers with bad credit. Arkansas is one of the most sought-after migration spots in the country due to affordable housing prices. Tens of thousands of people and businesses from high taxed states like New York to places that are tax-friendly and have affordable home prices. Home prices have skyrocketed in the past few years and in many states, potential homebuyers are priced out of the housing market. Arkansas did experience a surge in home prices. However, homes in Arkansas are reasonable compared to the rest of the United States. You can get a lot of house for the money in Arkansas. A home is the biggest investment for most people.

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How Do I Go About Finding Mortgage Lenders For Bad Credit in Arkansas?

Gustan Cho Associates is a mortgage broker licensed in 48 states, including Arkansas. In this article, we will guide first-time homebuyers on how streamlined the mortgage loan application process is. The mortgage process always changes due to rules and regulations. Even seasoned homeowners will need to update themselves in the mortgage process when they go about qualifying for a home loan. Do not feel bad about the complexity of the mortgage and underwriting process.

Starting The Pre-Approval Process With Mortgage Lenders For Bad Credit in Arkansas With No Overlays

The team at Gustan Cho Associates are experts in helping first-time homebuyers needing to qualify and get pre-approved in Arkansas. If you have any questions after reading this blog, we have hundreds of other articles on qualifying for a home loan as well as the loan process. If you need to contact us, please do not hesitate. You can call, text, or email us. We are available 7 days a week, in the evenings, on weekends, and during holidays.

First Step Qualifying For Home Loan with Low Scores | Contact Mortgage Lenders For Bad Credit in Arkansas With No Overlays

As first-time homebuyers, you may be getting conflicting answers to questions you may have. Once home buyers have decided to purchase a home, the next step is qualifying for home loan. There are countless different types of mortgage loan programs. Gustan Cho Associates has lending partnerships with over 170 wholesale mortgage lenders. The best mortgage loan program for first-time homebuyers are conventional and FHA loans. FHA and conventional loans are the most popular loan program in the nation. The down payment requirement is 3.5% on FHA loans and it is 3% to 5% on conventional loans.

Mortgage Loan Programs Available in Arkansas | Which Mortgage Options are BEST for You

There are hundreds if not thousands of mortgage loan programs. FHA, VA, USDA, and conventional loans are the best loan program for first-time homebuyers since they only require little to no down payment. GCA Mortgage offers non-QM and alternative loan programs for buyers of second homes, investment properties, and investment properties.

GCA Mortgage Has Reputation of being a One-Stop Mortgage Shop and the Best Mortgage Lenders For Bad Credit in Arkansas With No Overlays

We Are Called One-Stop Mortgage Shop

We will detail the loan programs available in a later paragraph of this article. Other loan programs are VA Loans, USDA Loans, non-QM loans, and Jumbo Mortgages which we will cover on the next series of articles. Qualifying for home loan is not just qualifying with minimum credit scores and income requirements. Just because consumers have high credit scores and sufficient income does not mean they will meet the minimum qualification requirements. In this blog article, we will cover all aspects of qualifying for home loan so home buyers will be ready to purchase their dream home without any hiccups during the mortgage loan approval process/

Qualifying For Home Loan With Bad Credit in Arkansas

Qualifying for home loan with bad credit is no issue. This holds true as long as they have re-established credit after a period of bad credit and timely payments in the past 12 months: FHA Loan programs have the most lenient mortgage lending guidelines with regard to collection accounts and minimum credit score requirements. Consumers do not have to pay off outstanding collection accounts with FHA Loans. Medical collection accounts and charge-offs are exempt from debt to income ratio calculations. Non-medical collection accounts do not have to be paid off. However, if the total aggregate unpaid balance of non-medical collection accounts is $2,000 or greater, then 5% of the outstanding unpaid collection balance will be used to calculate the borrower’s debt to income ratios.

Case Scenario On Qualifying For A Mortgage With Outstanding Collections

For example, here is a case scenario:

  • if the borrower has a total of $10,000 of unpaid outstanding collection balance
  • that collection account is non-medical
  • then 5% of the $10,000 or $500 will be used as a hypothetical monthly debt payment in calculating the debt to income ratios of borrowers
  • this holds true even though the borrower does not have to pay anything

The Importance of Choosing Mortgage Lenders For Bad Credit in Arkansas With No Overlays

One important thing to keep in mind is borrowers can have prior bad credit and outstanding collection accounts in qualifying for home loan. However, all loan programs require borrowers to have re-established their credit and have timely payment history for the past 12 months. The key is to have a history of timely payments for the past 12 months. Even if borrowers meet the minimum credit score requirements for the various mortgage loan programs but if they had late payments in the past 12 months, it will be difficult for anyone to qualify for a home loan. It does not matter whether it is an FHA Loan, Conventional Loan, VA Loan, USDA Loan, or Jumbo Mortgage.

Qualifying For Home Loan With 580 Credit Scores | What Type of Options Do I Have?

Qualifying for home loan with 580 credit scores is not a problem. Gustan Cho Associates has countless wholesale lenders that will close lower credit score borrowers. The minimum credit score to qualify for 3.5% down payment FHA Loans is 580 FICO. Borrowers with under 580 credit scores can qualify for FHA Loans. However, a 10% down payment is required and rates will be substantially higher, and compensating factors are required.

 Compensating Factors For Poor Credit Borrowers

 Compensating Factors For Poor Credit Borrowers

Compensating factors are additional positive factors that a borrower has such as the following:

  • reserves
  • verification of rent with low payment shock
  • longevity on the job
  • income that the borrower has but is not used to qualify for a home loan
  • the working spouse that is not on the mortgage note
  • larger down payment

Mortgage Lenders For Bad Credit in Arkansas With No Overlays on Debt to Income Ratio

FHA Loans have generous debt-to-income ratio caps. If borrowers have credit scores of at least 620 credit score, then the maximum front-end debt-to-income ratio is capped at 46.9% and the maximum back-end debt-to-income ratio is capped at 56.9%. If a borrower has credit scores below 620 credit scores, then the debt to income ratio cap is reduced to 43% DTI to get an approve/eligible per automated underwriting system. Minimum credit scores on conventional loans are 620 and maximum debt to income ratios are capped at 50% DTI.

Mortgage Lenders For Bad Credit in Arkansas For Under 620 FICO

Conventional Loans have a minimum credit score requirement of 620 credit scores. However, homebuyers can qualify for a home loan with under 620 Credit Scores with FHA Loans. As mentioned earlier, minimum credit score guidelines state that a mortgage loan applicant with a minimum 580 credit score can qualify for a 3.5% down payment FHA Loan. However, there are certain guidelines borrowers with under 620 credit scores need to meet.

Lender Overlays versus Agency Mortgage Guidelines 

Chances are that the Automated Underwriting System will require verification of rent for mortgage loan applicants with under 620 credit scores. Verification Of Rent is only valid and can only be used if the renter has paid their rental payments with a check. Needs to provide 12 months of canceled checks or bank statements showing a wire transfer from their bank account to their landlord’s bank account. All rental payments for the past 12 months need to be timely and the landlord needs to sign a verification of rent form provided by lenders.

Mortgage Lenders For Bad Credit in Arkansas Experts Working with Loans After Bankruptcy

Here are the qualification guidelines for Conventional Loans after a prior bankruptcy and foreclosure.

  • There is a four year waiting period after a Chapter 7 Bankruptcy to qualify for a conventional loan’
  • There is a two year waiting period after a Chapter 13 Bankruptcy discharge to qualify for a conventional loan
  • There is a four year waiting period after the Chapter 13 Bankruptcy dismissal date
  • There is a four-year waiting period to qualify for a conventional loan after a short sale
  • There is a four-year waiting period to qualify for a conventional loan after the recorded date of deed in lieu of foreclosure
  • There is a seven-year waiting period to qualify for a conventional loan after the recorded date of foreclosure

UPDATE:

If borrowers had a mortgage part of bankruptcy, they can qualify for a conventional loan four years from Chapter 7 Discharged Date The mortgage cannot be reaffirmed after the bankruptcy.  This holds true even if the foreclosure did not record after the Chapter 7 Bankruptcy Discharged Date. This is a brand new conventional loan guideline that was implemented and went into effect in August 2014.

HUD Guidelines on FHA Loans in Arkansas

HUD Guidelines On FHA Home Loans With No Overlays

Here are the qualification requirements for FHA Loans after prior bankruptcy and foreclosure:

  1. There is a two year waiting period after a Chapter 7 Bankruptcy to qualify for an FHA Loan
  2. There is a one year waiting period for a Chapter 13 Bankruptcy with the approval of the Chapter 13 Bankruptcy Trustee
  3. Chapter 13 Bankruptcy FHA Loans are all manual underwriting
  4. There is no waiting period after a Chapter 13 Bankruptcy discharge
  5. All Chapter 13 Bankruptcy mortgage loan applications are submitted via manual underwriting
  6. Verification of rent is required on all manual underwriting loan submissions
  7. There is a three year waiting period after the recorded date of foreclosure and deed in lieu of foreclosure
  8. The waiting period start date needs to be the date of the sheriff’s sale and/or the date the deed to the property actually changed hands
  9. Needs to be out of the borrower’s name and into the name of the lender
  10. The date homeowners turn in their keys to the lender is not the start date of the waiting period
  11. There is a three year waiting period after a short sale to qualify for FHA Loan

The short sale waiting period of three years starts from the date of the short sale which is reflected on the HUD-1 settlement statement.

Waiting Period After Bankruptcy And/Or Foreclosure on FHA Loans If You Had A Mortgage Included In Bankruptcy

Mortgage Part Of Bankruptcy with FHA Loans:

  1. If the consumer had a mortgage as part of bankruptcy, there is a three year waiting period after the recorded date of the foreclosure
  2. Not the date the mortgage was included in the bankruptcy
  3. For example, if the mortgage part of bankruptcy was discharged on January 1, 2015, and the foreclosure was not recorded until January 1, 2013, the three-year waiting period clock did not start until January 1, 2013

The borrower will not qualify for an FHA loan until January 1, 2016.

Qualifying For Home Loan With Credit Disputes

Many consumers go through credit repair prior to the mortgage process:

  • The way credit repair is done is by disputing derogatory credit items
  • Cannot have credit disputes during the mortgage process
  • Medical credit disputes or credit disputes with zero balances are exempt
  • However, consumers cannot have credit disputes on non-medical collection accounts with outstanding balances
  • Cannot have credit disputes on charge off accounts either
  • Borrowers can qualify for a home loan with a charge off accounts
  • Cannot qualify with a charge off accounts that have credit disputes
  • Before proceeding with the mortgage process, the credit disputes need to be retracted

The issue with retracting credit disputes is credit scores will often drop when credit disputes are retracted. Make sure not to have any credit disputes prior to applying for a home loan.

Qualifying With Bank Overdrafts Mortgage Lenders for Bad Credit in Arkansas

Lenders will require two months of bank statements from all mortgage loan applicants. Lenders will not qualify a borrower with overdrafts in their bank statements. Borrowers with overdrafts in bank statements in the past two months cannot use those bank statements. Either has to use another bank statement or need to let bank statements season for at least two months. If a bank account holder has a spouse or family member where they can add their name on their bank statements as a joint account holder and get a transaction history printout for the past two months that is signed, stamped, and dated by the bank teller, that can be one option. Bank printouts do not show YEAR-TO-DATE overdraft fees

Research The Best Mortgage Lenders for Bad Credit in Arkansas Who Can Do Your Loan

Why Can I Qualify With One Lender And Not Another Lender?

Just because borrowers meet the minimum federal lending guidelines does not mean that they will qualify with all lenders. Most lenders have mortgage lender overlays. Overlays are a particular own mortgage lending standards that surpass the federal minimum mortgage lending guidelines. For example, here is a case scenario:

  • if the home buyer were to walk into a bank and apply for an FHA Loan with a 580 FICO credit score
  • the chances are that the bank will tell the buyer they do not qualify for an FHA Loan with them
  • this is because their minimum credit score requirement is 640 FICO at most banks
  • this holds true even though FHA’s minimum credit score requirements are 580 FICO
  • This is called a mortgage lender overlay the bank has
  • HUD Guidelines do not require borrowers to pay off outstanding collection accounts to qualify for an FHA Loan
  • However, most banks and lenders will require borrowers have no outstanding collection accounts as part of their own internal lender overlays requirements

Homebuyers are told they do not qualify for a home loan by one lender, but that does not mean they do not qualify with another lender. Homebuyers looking for a national mortgage company licensed in multiple states with no overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.

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