Can I Qualify For Mortgage With Recent Late Payments?

Is It Possible To Qualify For Mortgage With Recent Late Payments?

Qualify For Mortgage With Recent Late Payments

One of the main reasons for a mortgage loan denial is due to recent late payments.

  • Just because mortgage borrowers meet minimum credit score requirements and meet qualified income requirements does not mean they automatically qualify for mortgage home loans
  • Mortgage Lenders want to see timely payments, especially in the past twelve months
  • Borrowers overall credit payment history is analyzed by both the Automated Underwriting Systems as well as by mortgage underwriters

Late Payments After Bankruptcy And Foreclosure

Late Payments after bankruptcy and/or housing event such as foreclosure and short sale is a definite negative and most lenders will not qualify borrowers with late payments after a bankruptcy and/or foreclosure.

  • However, late payments after bankruptcy or housing event is not a deal killer
  • It depends on the lender. Lenders can have mortgage overlays
  • Lender overlays are additional mortgage requirements that is above and beyond FHA, VA, USDA, Fannie Mae, and/or Freddie Mac
  • The Gustan Cho Team at USA Mortgage is a direct lender with no lender overlays on government and conventional loans so as long as the borrower gets an approve/eligible per Automated Underwriting System, we have no issues with late payments after bankruptcy and/or foreclosure
  • Unfortunately, not all mortgage lenders will honor the Automated Underwriting System Approval when it comes to late payments after bankruptcy and foreclosure

How Do Lenders View Late Payments

Residential mortgage lenders really frown upon late payments when they review a borrowers overall credit report and need to qualify borrowers for mortgage with recent late payments.

  • Many mortgage lenders will not qualify for mortgage with recent late payments for mortgage loan borrowers who had a late payment after a bankruptcy or foreclosure
  • Lenders view borrowers who had any late payments after bankruptcy and foreclosure a repeat offender
  • They will not go further with the loan process even though they have an approve/eligible per Automated Findings
  • This is due to the lender overlay
  • Good news is that lenders like The Gustan Cho Team at USA Mortgage has no overlays on government and conventional loans
  • If the Automated Underwriting System will render an approve/eligible per AUS Findings with late payments after bankruptcy and foreclosure or recent late payments, we will proceed with the mortgage process and can approve the borrower
  • Other mortgage lenders will not accept any mortgage loan borrowers with any late payments in the past 12 months
  • Any late payments after a bankruptcy and/or foreclosure will be an automatic disqualification and a mortgage loan denial by most lenders
  • History of late payments are viewed as financially irresponsible people
  • Most underwriters will use late payments against borrowers in denying a mortgage loan
  • It is very difficult to qualify for a mortgage with recent late payments but not impossible depending on the circumstances
  • Borrowers with recent late payments or late payments after bankruptcy or foreclosure definitely needs to consult with a loan officer and lender who has no overlays
  • There are stages of late payment histories
  • A borrower can be 30 days late, 60 days late, or 90 or more days late

What Action Should I Take To Qualify For Mortgage With Recent Late Payments

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

  • Transunion
  • Equifax
  • Experian

Carefully review each credit report and each tradeline carefully and see which creditor is reporting late on 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
  • Consumers who just overlooked a bill and forgot to pay but otherwise had a great payment history with the creditor, try calling the creditor and see if they can delete the late payment
  • If it was the only late payment, most creditors will remove or delete the late payment 
  • Consumers who had a history of late payments, it will be difficult to have it deleted by creditors

How Lenders Qualify For Mortgage With Recent Late Payments

Mortgage lenders will view definitely not favorably view borrowers that has a late payment in the past 24 months.

  • Most mortgage lenders will not qualify for mortgage with recent late payments in the past 24 months
  • There are a few mortgage lenders that will qualify for mortgage with recent late payments
  • Mortgage loan borrower will pay a price with late payments on their credit report
  • Large down payment, reserves or other compensating factors may be required to get an approve/eligible per AUS
  • The mortgage lender will scrutinize a borrower with a recent late payment more so than a borrower with no late payments

Solutions On How To Qualify For Mortgage With Recent Late Payments?

I help many mortgage loan borrowers qualify for mortgage with recent late payments because I represent a national five star mortgage lender that has no overlays.

  • As long as the borrower has one or two recent late payments, the Automated Underwriting System should render an approve/eligible per findings
  • However, mortgage loan applicants who have multiple late payments, then we might need to let time pass
  • Any borrowers with late payments needs to write a good detailed letter of explanation to explain the circumstances of the late payments
  • For those who had multiple recent late payments, it might be difficult to qualify for a conventional loan, however,  FHA loan might be the only option

Manual Underwriting With Late Payments

Over 25% of all mortgage loans originated and funded by The Gustan Cho Team at USA Mortgage are borrowers who are applying for VA and/or FHA Loans During and/or after a Chapter 13 Bankruptcy.

  • Under both VA and FHA Guidelines, mortgage borrowers can qualify for FHA and/or VA Loans during a Chapter 13 Bankruptcy Repayment Period as long as they have been in the payment plan for at least 12 months
  • There is no waiting period to qualify for both VA and FHA Loans after a Chapter 13 Bankruptcy discharged date
  • However, any FHA and/or VA borrower who is in a repayment Chapter 13 and/or had a Chapter 13 Bankruptcy discharge that has been seasoned for less than two years, the file needs to be manually underwritten

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

  • On manual underwriting, late payments after bankruptcy and/or housing event is normally a no go
  • Borrowers cannot have any late payments during and after a Chapter 13 Bankruptcy discharge date
  • One or two late payments after bankruptcy or housing event is very bad but not always a deal killer

Home Buyers who need to qualify for mortgage with recent late payments with a direct mortgage lender with no lender overlays, please contact The Gustan Cho Team at USA Mortgage at 262-716-8151 or email us at gcho@usa-mortgage.com. We are experts in helping mortgage borrowers qualify for a mortgage with recent late payments as well as late payments after bankruptcy and/or foreclosure.

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