Qualifying For Home Loan With Recent Late Payments

This ARTICLE On Solutions In Qualifying For Home Loan With Recent Late Payments Was UPDATED And PUBLISHED On February 10th, 2020

Qualifying For Home Loan With Recent Late Payments

This blog was written to help borrowers qualifying for home loan with recent late payments in the past 12 months.

  • Borrowers can qualify for home loans with bad credit
  • Lenders perfectly understand that people often go through hardship during their lives which affect their credit
  • However, almost all lenders want to see perfect payment history in the past 12 months
  • Most lenders do not want to see any late payments after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale

In this article, we will discuss and cover the mortgage guidelines with recent late payments.

How The Great Recession Affected American Families

The Great Recession of 2008 impacted millions of Americans in one or a combination of the ways listed below:

  • Many lost their businesses
  • Many lost their jobs they had for decades
  • Had to settle for jobs they were overqualified for
  • Lost their homes
  • Lost their life savings due to the collapse of the stock market
  • Had to return back to work after retirement
  • Had their home values plummet 
  • Many homeowners could no longer sell due to having their mortgage balance higher than the value of their homes
  • Had to file bankruptcy

How Do Lenders View Recent Late Payments

Many home buyers are under the belief that just because they meet the minimum credit score requirements to qualify for a mortgage. They feel that they do not meet the debt to income ratio requirements.

  • This is not the case
  • Lenders will not just look at the credit scores and income
  • Mortgage Lenders will review the overall credit report
  • Lenders will review the borrower’s payment history
  • Home Buyers who were affected by the 2008 Real Estate and Credit Meltdown and had late payments and defaulted on creditors during that period can qualify for home loans with prior bad credit
  • Lenders want to see that borrowers have recouped and re-established credit
  • Borrowers who had a life-changing event like a death in family, divorce, or health issues and their credit had suffered during that period can qualify for a home loan
  • This holds true as long as they have recovered and re-established credit
  • However, Qualifying For Home Loan With Recent Late Payments after a bankruptcy and/or foreclosure or other significant life-changing events can be an issue if they have late payments after bankruptcy and/or foreclosure

There are two ways on how lenders will view recent late payments:

  1. Underwriters Discretion
  2. Automated Underwriting System Findings

Recent Late Payments In Past 12 Months

Recent Late Payments In Past 12 Months

Lenders frown on any late payments in the past 12 months. All borrowers’ applications will go through the Automated Underwriting System for automated approval as well.

  • The Automated Underwriting System can render an approve/eligible per Automated Underwriting System Findings with recent late payments
  • If borrowers get an automated approval with recent late payments, that is fine with a lender like us at Gustan Cho Associates
  • However, lenders with overlays may not approve the mortgage loan
  • For borrowers who do have recent late payments, Qualifying For Home Loan With Recent Late Payments should be no issue with a lender that has no overlays like Gustan Cho Associates

Qualifying for home loan with recent late payments is often challenging. This is because most lenders require timely payment history on all payments for the past 12 months.

  • Many lenders consider a 30-day late payment an internal overlay
  • They will not proceed with processing and underwriting a mortgage loan application
  • They do not care for any excuses whether the family dog was in the hospital, the wife had a baby, or the borrower had to attend a funeral
  • Bottom line is a 30-day late payment on any credit payments can be a cause for a mortgage loan denial

Although borrowers might have stellar credit for many years, a 30 day late payment within the past year can be a deal killer, depending on the lender.

Solutions And Advice In Qualifying For Home Loan With Recent Late Payments

What is the Solutions And Advice In Qualifying For Home Loan With Recent Late Payments

I advise my borrowers who had a recent 30-day late payment reported on their credit bureaus to contact the creditor. See if they will show mercy and give them a one time reprieve and delete the 30-day late payment history.

  • Borrowers have had the credit account for some time and been timely and just got a recent late payment, the chances are great that the creditor will remove the 30-day late payment history
  • However, borrowers who had a history of late payments with the particular creditor, the chances are extremely slim that they will remove it
  • In the event if borrowers have had timely monthly payment history with the creditor and the phone representative says that they cannot remove the late payment history, then politely ask to speak to a supervisor or manager and plead your case with them

Many will be surprised how many times my borrowers got a 30-day late payment history deleted off their credit reports by not just giving up with the phone representative and asking to speak with a credit manager.

Overlays In Qualifying For Home Loan With Recent Late Payments

Overlays are additional mortgage requirements implemented by the individual lender that is above and beyond those of the Automated Underwriting System.

  • So even if the AUS automated approval may say it is approved, the lender may say that they will not do the deal due to their overlays
  • Qualifying For Home Loan With Recent Late Payments is no problem
  • Choose a lender with no overlays

Home Buyers who are looking in getting Qualifying For Home Loan With Recent Late Payments with a direct lender with no mortgage overlays on government and conventional loans, please contact us at Gustan Cho Associates at 262-716-8151 or text for a faster response. Gustan Cho Associates has no overlays on government and conventional loans. We just go off finding the Automated Underwriting System. Borrowers can also email us at gcho@gustancho.com.

  1. j. perez says

    I have late payments on my credit report I am now reestablishing my credit with a current secure credit card. how long should I use that card so I can approve for a mortgage loan

    1. Gustan Cho, NMLS 873293 says

      Get three secured credit cards. Discover It Secured Card, Open Sky, Capital One Secured Card with at least $500 credit limit. Go to http://www.gustancho.com and click resources and look at our credit repair guide. Let’s wait six months of your last late payment to apply for a mortgage. Please contact us at gcho@gustancho.com if you have any questions or want to get qualified. Looking forward to working with you and your family.

  2. Brenna J says


    I just watched your YouTube video hosted by Alex Carlucci on Gustan Cho Associates YouTube Mortgage Channel regarding bankruptcy dismissal. I have two bankruptcies but both were voluntary bankruptcy dismissal. I did not go through with either because I was able to manage my finances. They were both mistake that I completely regret. My credit score is affected by this, although my credit utilization is under 10%, the only debt I have is $15k in student loans and $14k remaining on a financed car. I had a few late payments but this year so far, I have paid everything on time. I actually own a home which is paid off and would sale as is if I am able to get approved for new home. I just need advice if trying to purchase a new home with my current situation will be approved?

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