Mortgage With Good Credit But Recent Late Payments
January 1, 2022 - 7 min read
Mortgage loan applicants will run into hurdles in getting an approve/eligible per automated underwriting system (AUS) findings for a mortgage with good credit but recent late payments. All owner-occupant mortgage loan programs allow prior collections, charge-offs, late payments, and bad credit. The keyword here is PRIOR.
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How Can I Get An Approve/Eligible Per Automated Underwriting System (AUS)?
The automated underwriting system (AUS) and mortgage lenders want borrowers to have recovered and have been timely with all of their monthly payments for at least one year after a period of bad credit. It is key for mortgage loan applicants to have timely payments in the past 12 months to get an approve/eligible per AUS findings. FHA and VA loans allow manual underwriting on FHA and VA loans. FHA and VA manual underwriting guidelines require mortgage loan applicants to have been timely with all of their monthly payments for the past 24 months. Gustan Cho Associates has aggressive manual underwriting lending partners that we can waive one or two late payments in the past 24 months on manual underwriting borrowers.
What Does Approve/Eligible per Automated Underwriting System Mean?
The key in getting an approved/eligible per automated underwriting system (AUS) for a mortgage is to have timely payments in the past 12 months. The chances of getting an AUS approval are better for a borrower with a lower credit score, but timely payments in the past 12 months versus a borrower with a higher credit score with recent late payments in the past 12 months. Timely payments are key in getting an approved/eligible per automated underwriting system. Lenders understand borrowers can go through periods of bad credit. However, lenders want borrowers to have recovered and have been timely in the past 12 months. In this article, we will discuss qualifying for a mortgage with higher credit scores, but recent late payments in the past 12 months.
Minimum Credit Score Requirements To Qualify For A Mortgage
There are minimum credit score requirements to qualify for a residential mortgage loan. However, borrowers can have issues qualifying for Mortgage With Good Credit But Recent Late Payments. Borrowers need to meet minimum credit score requirements. However, timely payment history in the past 12 months is normally a must to get an approve/eligible per Automated Underwriting System Approval. Borrowers can qualify for Mortgage With Good Credit But Recent Late Payments but the key issue is how many late payments in the past 12 months. One or two late payments in the past 12 months is not a deal killer. Multiple late payments will be an issue.
Minimum Credit Scores Required To Qualify For Mortgage
All mortgage loan programs have minimum credit score requirements. The minimum credit score requirements on government loans are set by the federal government agency. Fannie Mae and/or Freddie Mac sets the credit and/or income guidelines on conventional loans. Non-QM and alternative lending companies set their own lending requirements. Below are the general minimum credit requirements on government, conventional, jumbo, and non-QM loans.
- To qualify for FHA loans, the minimum credit score is 500
- USDA loans require a 580 credit score
- Homebuyers with credit scores between 500 and 579, a minimum of 10% down payment are required
- To qualify for an FHA loan with a minimum 3.5% down payment, a home buyer needs a 580 credit score
- To qualify for a conventional loan, the minimum credit score needed is 620
- There are no minimum credit score requirements on VA loans
- However, a 580 score is recommended to get an approve/eligible per Automated Underwriting System (AUS) Approval
- Jumbo mortgage borrowers normally need minimum credit scores of 700 or higher and a 43% DTI
- Gustan Cho Associates has traditional 90% LTV jumbo mortgages with up to 50% debt to income ratio and credit scores as low as 660 FICO
- NON-QM loans minimum credit score requirements depend on the individual non-QM lender
- Gustan Cho Associates offers no-doc mortgages for primary homes with a 660 FICO and reserves
- Bank Statement Loans For Self-Employed Borrowers depends on the individual non-QM mortgage lender
Condotel and non-warrantable condominium mortgage loan borrowers need a minimum of 680 credit scores.
Borrower’s Credit History On Credit Report
Although the above are mandatory minimum credit scores for the particular mortgage loan programs, all mortgage lenders will review the overall credit history of the borrower. All lenders realize that mortgage loan applicants may have periods of bad credit and/or prior bad credit. However, recent late payments, especially in the past 12 months can be a problem in getting a mortgage loan approval even if the mortgage loan applicant has higher credit scores. A lower credit score borrower has a much better chance of getting a mortgage approval than a borrower with a much higher credit score but with recent late payments.
Recent Late Payment In Past 12 Months
A recent late payment that is reported on the credit report is any late credit payment that is 30 days old. Late payment will be devastating and can lower a person’s credit score by 40 or points. It does not matter how much the minimum monthly payment is. Whether it is a monthly minimum payment of $5 dollars or $1,000 dollars, a 30-day late payment is considered all the same. It will drop credit scores and will affect the way mortgage loan underwriters will view credit profiles which can affect the chances of mortgage approval.
Importance Of Timely Payments In The Past 12 Months
Lenders have a mandatory policy that a mortgage loan applicant has been timely with paying their bills for the past 12 months. Other lenders want to see 24-month on-time payment history. Banks and credit unions have tougher guidelines when it comes to seeing a 24 monthly on-time payment history. Even though borrowers’ credit score is over 700, one late payment on their credit report can hurt the chances of them getting mortgage approval.
Recent Late Payments May Delay Mortgage Loan Approval
If the borrower is seeking to do a refinance mortgage loan and has late payment history on their current mortgage in the past 12 months, the chances will be tough for them to get a new refinance mortgage loan. They may have to wait until they have re-establish their on-time payment on their mortgage for at least 12 months. Most banks and credit unions require 24 months on-time mortgage payment history as part of their overlays.
Is It Possible To Get Mortgage With Good Credit But Recent Late Payments
The chances of getting a mortgage loan approval with a bank with late payments in the past 12 months will be very slim. However, mortgage bankers are more lenient when it comes to recent late payments. One or two recent late payments at the same time in the past 12 months may be possible with a letter of explanation. Mortgage lenders like us will go off AUS Findings. Borrowers can get approve/eligible per AUS for a mortgage with good credit but recent late payments. However, multiple and periodic recent late payments in the past 12 months will be difficult in getting an approve/eligible per AUS.
Timely Payments In The Past 12 Months Is More Important Than Having Prior Bad Credit
Borrowers can qualify with credit scores of over 620. But with multiple recent late payment histories, chances are they may need to wait until a timely payment history has been re-established. Borrowers could have had dozens of late payment histories for a year. However, with re-established credit history for at least 12 months they should get an approve/eligible per Automated Underwriting System. It is better to have lower credit scores and timely payments in the past 12 months than a higher credit score and late payments in the past 12 months.
How Mortgage Underwriters View Recent Late Payments
Some mortgage underwriters will automatically deny borrowers who have had late payments in the past 12 months. Mortgage underwriters have underwriter discretion on borrowers with recent late payments. The mortgage underwriter will want a letter of explanation as to the late payment history and derogatory credit. Reasons can be such as being out of work or other extenuating circumstances. However, once the borrowers got themselves re-established after getting full-time employment, the underwriter may give the borrower approval depending on the borrower’s overall history. Found full-time employment and got back on track.
Solution To Qualifying For Mortgage With Good Credit But Recent Late Payments
There are potential solutions in taking steps in trying to get the recent late payment removed from the credit report. The first solution is to contact the creditor and see if they can give a one-time break and see if they can remove the late payment record. For consumers with a history of paying bills on time with the particular creditor and just got a recent late payment on record, the chances are that the creditor may remove the recent late payment history. If the representative on the phone says no to request, ask to speak to a supervisor. Please be as polite as possible and see if the supervisor is for mercy and have the derogatory late payment removed for a one-time deal. Consumers will be surprised by how many times a creditor will work with them.
Can I Qualify For A Mortgage With Multiple Recent Late Payments
Borrowers’ history of paying bills on time and have multiple late payment histories on credit reports but have decent credit scores may encounter problems in getting automated AUS Approval. However, mortgage loan applicants will be able to qualify for a mortgage loan if the late payments on the credit report passes and age. Worst case scenario, borrowers may have to wait one year of making payments on time. However, there are mortgage lenders that will approve Mortgage With Good Credit But Recent Late Payments with an AUS Approval. No matter how small the monthly payment is consumers need to pay monthly minimum payments on time. One or two recent late payments can plummet credit scores and will most likely delay chances of getting a mortgage loan approval.
Gustan Cho Associates does not have any mortgage overlays on government and conventional loans. Borrowers can qualify for a mortgage with good credit but recent late payments with an AUS Approval. All manual underwriting requires timely payments in the past 12 months. Please contact us at 262-716-8151 or text us for a faster response if trying to qualify for a mortgage with good credit but recent late payments. Or email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.
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