Mortgage With Late Payments In The Past 12 Months

Can You Get a Mortgage with Late Payments? Here’s How to Make It Happen in 2024

One of the most significant financial actions you’ll ever make is purchasing or refinancing a home. But what if you’ve had late payments in the past? Can you still qualify for a mortgage with late payments on your credit report? The good news is that it’s possible! In this guide, we’ll explore how you can still achieve your homeownership dreams even if you’ve had some financial bumps along the way.

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Understanding Late Payments and Their Impact on Mortgages

Late payments can feel like a roadblock when trying to qualify for a mortgage, but they don’t have to be the end of the road. Let’s break down why late payments matter and how they affect your mortgage approval process.

When a lender reviews your mortgage application, they look at your credit history to see how well you manage your debts. Late payments, especially recent ones, suggest you might struggle with your finances, making you a riskier borrower. However, if you’ve got a solid track record otherwise, there’s hope. Speak With Our Loan Officer for Mortgage Loans With Late Payment

Why Do Lenders Care About Late Payments?

Lenders use your payment history to predict how likely you are to make your mortgage payments on time. Late payments signal that you might not always pay on time, which can be a red flag. However, not all lenders see mortgage with late payments the same way. Some are more flexible, especially if you show that your late payments were due to temporary setbacks.

Qualifying for a Mortgage with Late Payments

Now, let’s get into the specifics. How can you qualify for a mortgage if you have late payments on your credit report?

The Importance of the Last 12 Months

The key to getting approved for a mortgage with late payments is showing a strong payment history over the last 12 months. Lenders are more likely to overlook older late payments if you’ve been consistent recently. If you’ve been on time with all your bills for the past year, you’re in a much stronger position to get approved.

Can You Get a Mortgage with Late Payments in 2024?

Yes, you can! But it largely depends on your overall financial picture and the type of lender you work with. Let’s break down the options.

FHA Loans: FHA loans are backed by the Federal Housing Administration. They are known for being more lenient with credit issues, such as late payments. If your credit score is at least 580 and you have not had any late payments in the last 12 months, you might be eligible for an FHA loan.
VA Loans: VA loans present an excellent option for veterans and active-duty military personnel. They offer greater flexibility for individuals with credit issues, much like FHA loans. Usually, 12 months of on-time payments are required to meet the qualifications.
Non-QM Loans: Non-QM (Non-Qualified Mortgage) loans are specifically designed for borrowers who don’t fit the standard lending criteria. These loans often have no lender overlays, meaning they don’t add extra requirements beyond necessary. A Non-QM loan might be your best bet if you have recent late payments.

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The Role of Automated Underwriting Systems (AUS)

When you apply for a home loan, the lender will probably use a computerized system to evaluate your application. This system evaluates your financial situation, credit history, and other factors to decide whether you qualify.

What Happens if You Get an AUS Approval?

If you receive an AUS approval, and your lender doesn’t have overlays (extra requirements), you’re in good shape to close on your mortgage—even with late payments on your record. However, the process might be more challenging if your application is flagged for manual underwriting.

Manual Underwriting: What to Expect

If your mortgage application requires manual underwriting, the underwriter will go through your financials with a fine-tooth comb. Here’s what you need to know:

FHA Loans: You generally need 24 months of on-time payments to qualify through manual underwriting.
VA Loans: You need at least 12 months of on-time payments.

Manual underwriting gives the underwriter the discretion to consider extenuating circumstances. You might still get approved if you can explain why you had late payments and how your situation has improved.

Strategies to Improve Your Chances of Getting a Mortgage with Late Payments

If you’re worried about qualifying for a mortgage with late payments, here are some steps you can take to improve your chances.

Check Your Credit Report: Start with obtaining credit reports from the three primary bureaus: TransUnion, Equifax, and Experian. Look for any inaccuracies or errors that could be dragging down your score. If you find a late payment that shouldn’t be there, dispute it right away.
Consider Writing a Letter of Explanation: If you had trouble making payments on time because of a temporary situation, such as losing your job or a medical crisis, writing a letter to explain the circumstances to your lender can be helpful. Be honest and detail how your situation has improved since then.
Build a Stronger Financial Profile: Lenders consider more than just your credit score. They also look at your income, work history, and savings. If you’ve been late with payments, having a stable income and a good amount of money saved can help lower the lender’s risk.
Explore Non-QM Loans: Non-QM lenders are more flexible with credit issues, making them a great option for borrowers with late payments. These loans often come with higher interest rates, but they can be a good way to get into a home when traditional loans aren’t an option.

Late Payments After Bankruptcy or Foreclosure

If you previously experienced bankruptcy or foreclosure and have had late payments since then, you might think you won’t be able to get a mortgage. However, that’s not necessarily true.

How Lenders View Late Payments After Bankruptcy or Foreclosure

Lenders are particularly cautious about late payments after a major credit event like bankruptcy or foreclosure. They want to see that you’ve turned the corner and are managing your finances responsibly. If you’ve had late payments since your bankruptcy or foreclosure, you’ll need to show a solid payment history since then to convince lenders that you’re ready for a mortgage. Speak With Our Loan Officer for Mortgage Loans With Late Payment after bankruptcy

Getting Approved for a Mortgage with Late Payments Post-Bankruptcy

To get approved for a mortgage after bankruptcy or foreclosure, you’ll need to meet certain criteria:

FHA Loans: Generally, you must wait two years after a Chapter 7 bankruptcy and three years after a foreclosure to qualify. However, if you’ve had late payments since then, you may need to wait longer or provide a strong explanation.
VA Loans: VA loans are more lenient, requiring a two-year waiting period after a bankruptcy or foreclosure. Again, having recent late payments will make it tougher, but not impossible, to qualify.
Non-QM Loans: Non-QM lenders can be a lifeline for those with recent late payments after a bankruptcy or foreclosure. They often require a shorter waiting period and are more willing to overlook credit issues.

How Lender Overlays Can Affect Your Mortgage Approval

Lender overlays are additional requirements lenders impose on top of the standard guidelines set by FHA, VA, or Fannie Mae and Freddie Mac. These overlays can make it harder to qualify for a mortgage, especially if you have late payments.

What Are Lender Overlays?

Overlays are like extra hoops you have to jump through. For example, while the FHA might allow a certain credit score, a lender with overlays might require a higher score. This is why working with a lender with no overlays can be crucial if you have late payments on your record.

Finding a Lender Without Overlays

Not all lenders impose overlays. Non-QM lenders, for example, typically don’t add extra requirements beyond what’s necessary. If you’ve had late payments and are finding it hard to qualify for a mortgage, consider them a great option.

Steps to Take If You’re Denied a Mortgage Due to Late Payments

Getting denied for a mortgage because of late payments can be disheartening, but it doesn’t mean you’re out of options. Here’s what you can do next:

Improve Your Credit Before Reapplying: If late payments caused your denial, focus on building a solid payment history over the next 6 to 12 months. Pay all your bills on time and avoid opening new lines of credit.
Reconsider Your Loan Options: If a conventional loan isn’t an option, look into FHA or VA loans, which are more forgiving of credit issues. Non-QM loans are also worth considering if traditional loans are out of reach.
Get Help from a Mortgage Professional: Remember that a mortgage broker who focuses on assisting individuals with credit difficulties can be incredibly helpful. They can connect you with more flexible lenders and help you navigate the process.

Final Thoughts: Don’t Let Late Payments Stop You from Buying a Home

Late payments don’t have to keep you from owning a home. You can still qualify for a mortgage with the right strategy and a lender who understands your situation. Remember to stay ahead of the game by reviewing your credit, exploring various loan choices, and collaborating with a mortgage expert to navigate the journey.

In 2024, the housing market continues to be competitive, but there are opportunities for those who are prepared. Don’t let past mistakes hold you back. Take the steps outlined in this guide, and you’ll be well on your way to securing a mortgage—even with late payments.

At Non-QM Mortgage Lenders, 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 late payments, don’t hesitate to contact Non-QM Mortgage Lenders at 800-900-8569 or text us for a faster response. Email us at gcho@gustancho.com. We are experts in helping borrowers qualify for a mortgage with late payments. Speak With Our Loan Officer for Mortgage Loans With Late Payment

FAQs: Mortgage With Late Payments In The Past 12 Months

1. Can I still get a mortgage if I have late payments on my credit report? You can still get a mortgage with late payments on your credit report. Some lenders, like FHA or Non-QM lenders, are more lenient if you’ve shown timely payments for at least the last 12 months.
2. How do late payments affect my chances of getting a mortgage? Late payments can make it harder to get approved because lenders see it as a sign of financial instability. However, some lenders may still approve your mortgage with late payments if your overall financial profile is strong.
3. What type of loan can I get if I pay late? FHA loans and Non-QM loans are great options for borrowers with late payments. VA loans are also more flexible for veterans, but you’ll need 12 months of on-time payments to qualify.
4. Can I qualify for a mortgage with late payments after bankruptcy? Yes, it’s possible. You’ll usually need to wait two years after a Chapter 7 bankruptcy and have no recent late payments for FHA loans. Non-QM lenders may allow for a shorter waiting period and be more flexible with late payments.
5. How can I improve my chances of getting a mortgage with late payments? Check your credit report for mistakes. If you’ve made late payments, write a letter to explain why. Show that you have a steady income and savings. If you can’t get a traditional loan, think about non-QM loans.
6. Do I need to wait a certain amount after late payments to apply for a mortgage? It varies depending on the lender and the type of loan. Some lenders may disregard older late payments if you have made on-time payments for at least 12 months. FHA loans require 24 months of on-time payments for manual underwriting, while VA loans require 12 months.
7. What is a Non-QM loan, and can it help if I have late payments? A Non-QM (Non-Qualified Mortgage) loan is designed for borrowers who need to meet traditional mortgage requirements, such as those with late payments or lower credit scores. These loans can be more flexible but may come with higher interest rates.
8. How can I fix my credit if I have late payments? You can boost your credit by paying all upcoming bills on time. If you find any incorrect late payments on your credit report, make sure to dispute them. Additionally, if you had a one-time late payment, you can ask your creditors to remove it.
9. What is manual underwriting, and how does it affect my mortgage approval with late payments? Manual underwriting is a more detailed review of your finances, used when automated systems can’t approve your loan. With late payments, manual underwriting typically requires 24 months of on-time payments for FHA loans and 12 months for VA loans.
10. Will late payments affect my ability to refinance my home? Yes, late payments can affect your ability to refinance. However, if you’ve had at least 12 months of on-time payments, you may still be able to refinance with certain loan programs like FHA or Non-QM loans.

This blog about Mortgage With Late Payments In The Past 12 Months was updated on September 3rd, 2024.

Mortgage With Late Payments In The Past 12 Months