Can I Qualify for a Mortgage With Recent Late Payments?

Gustan Cho Associates are mortgage brokers licensed in 48 states

We can help you qualify for a mortgage with recent late payments. Apply NOW with Gustan Cho Associates and leave it to us. 

One of the main reasons for a mortgage loan denial is recent late payments. That’s because it’s difficult to convince a lender that old bad credit problems are behind you if you’re still missing payments. It is possible to get mortgage approval with recent late payments, but you probably need a lender that does not add underwriting overlays.

Gustan Cho Associates is one of those lenders.

See if you qualify in 5 painless minutes. 

Late Payments After Bankruptcy or Foreclosure

Is it possible to have late payments after bankruptcy or foreclosure

Late payments after bankruptcy and/or housing events such as foreclosure or a short sale can derail your mortgage application. To approve a mortgage after foreclosure or bankruptcy, most lenders want to know that your credit problems are unlikely to occur again. That’s kind of hard to prove if you don’t pay your bills on time.

So how is it possible to earn mortgage approval with recent late payments? It depends on your entire file and how an automated underwriting system (AUS) weighs all the parts of your application. If an AUS issues an approval, and your lender does not add “overlays” to its guidelines, you can close a mortgage with recent late payments.

What are “overlays?” Lender overlays are additional mortgage requirements that are above and beyond FHA, VA, USDA, Fannie Mae, and/or Freddie Mac. Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays for government-backed and conventional loans. As long as the borrower receives an approval from an AUS, GCA can close the loan.

If your file can only be underwritten manually, you’ll need 24 months of on-time payments to qualify for most mortgage programs.

Related: How Mortgage Lenders Look at Your Credit Report

How Do Most Mortgage Lenders View Late Payments?

Residential lenders really frown upon late payments when they review a borrower’s overall credit report. Many mortgage lenders will not qualify for a mortgage with recent late payments for borrowers who had a late payment after a bankruptcy or foreclosure.

Lenders often view borrowers who had any late payments after bankruptcy and foreclosure as repeat offenders. They will not go further with the loan process even though they have an approve/eligible per AUS.

Many lenders will not accept any borrowers with any late payments in the past 12 months. The history of late payments is viewed as financially irresponsible. Most underwriters will use late payments against borrowers in denying a mortgage loan.

However, AUS does not impose human judgment, only mathematical decisions. It’s just a formula. The software may overlook late payments if your down payment is large, or you have a lot of reserves in your bank accounts, or your job is stable and your earnings are high, or your overall credit rating is good despite recent late payments.

Qualify for Mortgage With Recent Late Payments

How to qualify for a recent late payment mortgage

The first step you should take is to request a credit report from all three credit reporting agencies;

  • Transunion
  • Equifax
  • Experian

Carefully review each credit report carefully for late  payments:

  • A recent late payment will substantially drop credit scores,
  • The good news is that as time passes, credit scores will gradually improve and have less impact on credit scores
  • If you just overlooked a bill but otherwise had a great payment history with a creditor, ask them to remove the late payment from your credit report.
  • If it was the only late payment, many creditors will delete the late payment,

Creditors will be less likely to help if you have a history of late payments with them.

Related: FHA Mortgage Approval With Recent Late Payments (It’s Possible)

Lender Underwriting Guidelines: Late Payments

Here is Fannie Mae’s official guidance for lenders concerning late payments on a credit report:

“Credit histories that include recent late payments represent a higher credit risk than those with late payments that occurred more than 24 months ago. When there are payments that were 30, 60, or 90 days (or longer) past due, the lender must determine whether the late payments represent isolated incidences or frequent occurrences.

“Delinquent payments must be evaluated in the context of the borrower’s overall credit history, including the number and age of accounts, credit utilization, and recent attempts to obtain new credit. For example, a credit history that includes delinquent payments along with recent inquiries and a high balances-to-limits ratio indicates a high credit risk.”

If you have late payments, you are unlikely to get approved if you also have applied for or opened new accounts and/or have high balances on your existing accounts.

If you can come up with a good letter of explanation for late payments, you can increase your chances of loan approval. For those who had multiple recent late payments, it might be difficult to qualify for a conventional loan. However, an FHA loan might be a decent option.

Manual Underwriting With Late Payments

What is manual insurance with late payments

Not every applicant qualifies for automated underwriting. You may not have enough credit history, or you are self-employed and your income dropped substantially. Your credit report may be wrong because of identity theft. Or the system indicates that it cannot issue a decision. These files must be downgraded to manual underwriting.

On manual underwrites, borrowers cannot have any late payments in the past 12 months.

At Gustan Cho Associates, we get mortgages for people with recent late payments all the time. We can help you with your letters of explanation for credit problems that were not your fault.

Consumers who need to qualify for a mortgage with recent late payments, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] We are experts in helping borrowers qualify for a mortgage with recent late payments.

Find out of your qualify right now.