Timeline To Qualify For A Mortgage With Bad Credit

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This ARTICLE On The Timeline To Qualify For A Mortgage With Bad Credit Was PUBLISHED On May 16th, 2020

What is the timeline to qualify for a bad credit mortgage

The Timeline To Qualify For A Mortgage with bad credit depends on the particular individual.

  • Many homebuyers think hiring a credit repair company will help them with the Timeline To Qualify For A Mortgage with low credit scores and bad credit
  • This is not true
  • Whatever a credit repair company does, the consumer can do it themselves
  • Often times, credit repair can do more damage than good for those needing to qualify for a mortgage
  • You cannot have credit disputes during the mortgage process
  • All credit disputes need to be removed
  • Retracting credit disputes will often plummet credit scores
  • Many times the creditor and/or credit bureaus will often give consumers a hard time retracting credit disputes
  • Credit repair is a total waste of money and time
  • Save your money
  • At Gustan Cho Associates, we help all of our borrowers with boosting their credit scores and work on their credit so they can qualify for a mortgage
  • We will help homebuyers re-establish credit after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, or periods of bad credit

In this article, we will discuss and cover the Timeline To Qualify For A Mortgage With Bad Credit.

Timeline To Qualify For A Mortgage With Bad Credit For Homebuyers

You can have prior bad credit and still qualify for a mortgage.

  • You do not have to pay outstanding collections and/or charged off accounts to qualify for a mortgage
  • If you have prior bad credit such as outstanding collection accounts and/or charged off accounts, leave those alone
  • Do not hire a credit repair company and try to dispute them and hope it will get deleted off your report
  • As we mentioned in the earlier paragraph, you cannot have credit disputes during the mortgage process
  • Retracting credit disputes often plummets credit scores
  • The reason is because once a consumer dispute a derogatory credit tradeline, the credit bureaus automatically discount the negative factor from the credit scoring formula
  • What this means is the negative disputed credit tradelines are not counted when the credit bureaus analyze a consumer credit score
  • Therefore, when a consumer dispute a derogatory credit tradeline, the credit scores will increase

On the flip side, when the consumer retracts the credit dispute, the negative numerical factor is factored back on the credit scoring model so the credit scores will decrease.

First Step In The Qualification Process For A Home Loan

What is the first step in the qualification process for a home loan?

Mortgage lenders want to see if the borrower are able to repay their new mortgage and be timely on their payments.

  • The ability to repay is the most important factor that is most important to lenders
  • You can have prior bad credit and qualify for a mortgage as long as you have been timely for the past 12 months
  • The key in qualifying for a mortgage with bad credit is to have been timely in the past 12 months
  • Lenders understand that consumers may had prior bad credit due to health reasons, unemployment, divorce, loss of business, changing careers, and/or other reasons
  • However, they need to be reassured they have recovered from their financial hardships and are financially stable going forward
  • The likelihood for their employment to continue for the next three years is very important to all lenders
  • Continuation of income for the next three years is a must and requirement for all lenders. Outstanding collections and charged off accounts do not have to be paid

You can still qualify for a mortgage with outstanding collections and charged-off accounts.

Late Payments In The Past 12 Months

All borrowers need to go through Fannie Mae and/or Freddie Mac’s Automated Underwriting System (AUS). Here are the three findings of the AUS:

  1. Approve/eligible: This is an automated underwriting system approval and it is what you would want
  2. Refer/eligible per AUS: This means the AUS cannot render an automated approval but can be manually underwritten on FHA and VA loans
  3. Refer/ineligible per AUS: This means the borrower is not eligible

Borrowers need to meet all agency mortgage guidelines. The key in getting an approve/eligible per automated underwriting system is being timely on all payments for the past 12 months.

How Long Does It Take To Qualify For A Mortgage With Bad Credit

How Long Does It Take To Qualify For A Mortgage With Bad Credit

All borrowers who contact us at GCA Mortgage Group will qualify for a mortgage. It is not if you will qualify but rather when you will qualify. We help borrowers with credit scores in the 400’s to 500’s qualify for a mortgage after advising them on how to re-establish their credit and boost their credit scores. If a borrowers with a bunch of late payments come to us, the best advice to tell them is to get current on all of their payments and be timely for the next 12 months. Remember that you need to be timely on all of your payments in the past 12 months. Borrowers who have lower credit scores due to no credit tradelines need to get three secured credit cards with at least $500 credit limit. Each secured credit card should boost the borrower’s credit scores by 20 to 40 points. Borrowers with credit cards but low credit scores may try to pay down the balance to a 10% utilization ratio which is the key formula to maximize credit scores. Borrowers with recent bad credit should start re-establishing their credit by being timely, having a low credit utilization ratio, and having three to five credit tradelines. For mortgage information about this topic and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response.

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