Can I Get Approved For a Home Loan With Late Payments?
In this blog, we will cover and discuss qualifying for a new home loan with late payments in the past 12 months. Home Buyers can qualify for home loans with prior bad credit. Qualifying for a home loan with late payments in the past 12 months is different than qualifying for a mortgage with prior bad credit. Prior bad credit with outstanding collections and/or charged-off accounts is fine as long as borrowers have re-established themselves. Recent late payments in the past 12 months can be an issue when qualifying for a home loan.
One or two late payments in the past 12 months are not a deal killer but can be if the borrower cannot get approve/eligible per Automated Underwriting System Approval. Late Payments after bankruptcy and foreclosure are extremely frowned upon by mortgage underwriters. Again, late payments after bankruptcy and/or foreclosure are not always deal killers. In the following paragraphs, we will discuss and cover home loan with late payments in the past 12 months on home purchases.
Qualifying For Home Loan With Late Payments Versus Bad Credit
When lenders advertise that they can help folks get a home loan with bad credit, there is a catch. Homebuyers with prior bad credit due to extenuating circumstances but have re-established their credit and have been timely in the past 12 months, are fine. Lenders want to see borrowers’ overall credit history.
They won’t see that for the most part, the mortgage applicant has been paying their bills on time for the past twelve months. It is fine for borrowers who had prior bad credit and went through a period of bad credit due to extenuating circumstances.
Common Bad Credit
By bad credit, it means the following:
- late payments
- open collections
- judgments
- tax liens
- bankruptcy
- prior housing event such as foreclosure, deed in lieu of foreclosure, short sale
Qualifying For Home Loan With Late Payments Versus Bad Credit
Qualifying for Home Loan With Late Payments in the past 12 months is different than qualifying for a home loan with bad credit. Borrowers can qualify for a mortgage with bad credit such as outstanding collections, charged-off accounts, bankruptcy, and housing event. Qualifying for a home loan with late payments in the past 12 months is often frowned upon by mortgage underwriters.
The mortgage loan applicant needs to show re-establish credit after a period of bad credit with no late payments in the past 12 months and with positive credit history. Lenders will understand the period of bad credit borrowers has gone through and will require a letter of explanation.
How Far Back Do Lenders Look For Late Payments?
Lenders will accept prior bad credit, collections, charge-off accounts, and late payments. However, lenders want to see timely payments in the past 12 months. Manual underwriting guidelines require 24 months of timely payments.
Hard-working, financially responsible folks do go through periods of bad credit due to the following extenuating circumstances:
- lose their jobs
- businesses
- death in the family
- divorce
- or other extenuating circumstances
A short-term period of bad credit or even a prior bankruptcy, foreclosure, a deed in lieu of foreclosure, or a short sale is not the end of the world, and lenders understand this.
Re-Establishing Credit After Period of Bad Credit
For borrowers with a period of bad credit due to a job loss, business loss, divorce, or other extenuating circumstances the best advice is to start re-establishing credit and be timely on all payments. Chances are they will have a hard time to re-establish credit or adding positive unsecured credit with current bad credit. The best and fastest way of re-establishing credit right away is by getting a few secured credit cards. Religiously pay the minimum amount due each month timely. Three $500 secured credit cards will literally do a world of wonders.
Using Secured Credit Cards To Rebuild Credit
Secured Credit Cards best way of re-establishing credit and boosting credit scores. Those three secured credit cards, if used wisely and paid off at the end of the month, can improve credit scores by more than 100 points in a period of 12 months or less. Borrowers with late payments in the past 12 months can start getting three to five secured credit cards
Can I Qualify For a Mortgage With Recent Late Payments?
As mentioned earlier, a home buyer can get a home loan with bad credit as long as the bad credit history was an isolated incident.
If the home buyer has a ten-year credit history and every one of those ten years has had a late payment and derogatory payment history, then the chances will be difficult for them to get residential mortgage approval.
How Many Months Can You Be Late on Your Payments To Get a Mortgage?
If the bad credit history has been an isolated incident and the person has re-established themselves with new positive credit, then borrowers should have no problem getting a home loan with bad credit. Lenders will especially scrutinize the past 12 months’ payment history of the mortgage loan applicant.
One or two late payments in the past 12 months should not be an issue. However, multiple late payments in the past 12 months can and will be a problem in getting mortgage approval.
Qualifying For Mortgage With Lender With No Overlays
Borrowers with late payments in the past 12 months needing to qualify for a mortgage please contact us at Non-QM Mortgage Lenders at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Non-QM Mortgage Lenders are lenders with no lender overlay on government and conventional loans.
Non-QM Mortgage Lenders has a national reputation for being able to do loans other lenders cannot do. We do not have any overlays on home loan with late payments in the past 12 months or any overlays on late payments after bankruptcy or foreclosure. As long as the automated underwriting system renders an approve/eligible and borrowers can meet the conditions on AUS FINDINGS, borrowers will be on their way for loan approval and clear to close.
