Qualifying For Mortgage With Good Credit But Recent Late Payments

By Gustan Cho, NMLS 873293 Last updated Jun 12, 2018

Qualifying For Mortgage With Good Credit But Recent Late Payments

This BLOG On Qualifying For Mortgage With Good Credit But Recent Late Payments Was UPDATED On April 8th, 2018

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 past 12 months

One or two late payments in 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:

To qualify for FHA Loans, minimum credit scores is 500
USDA Loans require a 580 credit score
Home buyers with credit scores between 500 and 579, a minimum of 10% down payment is required
To qualify for a 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 loan borrowers need minimum credit scores of 700 or higher
NON-QM Loans require a 620 minimum credit score
Bank Statement Loans For Self Employed Borrowers require a 620 credit score
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 mortgage loan borrower.

All mortgage lenders realize that mortgage loan applicants may had 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 mortgage loan applicant has a much better chance of getting a mortgage loan approval than a mortgage loan applicant 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 credit report is any late credit payment that is 30 days old.

A 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 profile which can affect the chances of mortgage approval
Lenders have a mandatory policy that a mortgage loan applicant have been timely with paying their bills for the past 12 months
Other lenders want to see a 24 month on time payment history
Banks and credit unions have the tougher guidelines when it comes to seeing a 24 month 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 a mortgage approval
If 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
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 payment
One or two recent late payment 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 mortgage with good credit but recent late payments
However, multiple and periodic recent late payment in the past 12 months will be difficult in getting an approve/eligible per AUS
Borrowers can qualify with credit scores of over 620
But with multiple recent late payment history, chances are they may need to wait until timely payment history has been re-established
Borrowers could have had dozens of late payment history 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 past 12 months than a higher credit score and late payments in past 12 months
The mortgage underwriter will want a letter of explanation as of the late payment history and derogatory credit
- Reasons can be such as being out of work but once got yourself re-established after getting full time employment
- 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 credit report.

First solution is to contact creditor and see if they can give a one time break and see if they can remove the late payment record
Consumers with 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 for mercy and have the derogatory late payment removed for a one time deal
Consumers will be surprised on how many times a creditor will work with them

Multiple Recent Late Payments

Borrowers history of paying bills on time and have multiple late payment history on credit report but have descent credit scores may encounter problems in getting automated AUS Approval.

However, will be able to qualify for a mortgage loan if the late payments on credit report ages
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 payment can plummet credit scores and will most likely delay chances of getting a mortgage loan approval

The Gustan Cho Team does not have any mortgage overlays on government and conventional loans. Borrowers can qualify for mortgage with good credit but recent late payments with an AUS Approval. All manual underwriting requires timely payments in past 12 months. Please contact us at 262-716-8151 or text us for faster response if trying to qualify for mortgage with good credit but recent late payments.

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Mortgage With Good Credit But Recent Late Payments