Can You Get a Mortgage With Late Payments

In this blog, we will discuss and cover the question of can you get a mortgage  approval with late payments on a home purchase. One of the questions we get asked often is can you get a mortgage approval with late payments on a home purchase. The answer to this question is it depends on how many late payments and how long ago the late payment was. You can get a mortgage with prior bad credit. Mortgage applicants can get a mortgage with a prior bankruptcy, foreclosure, deed-in-lieu of foreclosure, short sale. This holds true as long as they meet the minimum waiting period requirements. In the following paragraphs, we will cover getting a mortgage approval with late payments.

Mortgage Approval With Late Payments

Mortgage loan applicants can get a mortgage with outstanding collections and/or charged-off accounts. You do not have to pay outstanding collections and/or charged-off accounts and still qualify for a mortgage. Lenders, as well as the automated underwriting system (AUS), fully understand mortgage applicants could have prior bad credit due to extenuating circumstances. However, most people recover from unemployment and/or other extenuating circumstances and have new jobs and re-establish themselves. Lenders want to see borrowers have recovered and rebuilt their credit after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, or periods of bad credit. Lenders want to see borrowers have rebuilt and re-established their credit after bankruptcy and/or a housing event.

Can I Get a Mortgage Approval With Late Payments and Bad Credit?

Borrowers can qualify for a mortgage with prior bad credit. However, need to have re-established credit and no late payments in the past 12 months.

• Lenders really frown upon late payments after a bankruptcy, foreclosure, deed in lieu of foreclosure, short sale
• Bad credit mortgage loans?
• What are bad credit mortgage loans?
• What is a home loan with bad credit?

Home Buyers can qualify for a mortgage with bad credit. Outstanding collections and charged off accounts do not have to be paid to qualify for home loans. However, timely payments in the past 12 months are crucial.

Can You Get a Mortgage Approval With Late Payments: Late Payments After Bankruptcy and Foreclosure

Lenders will frown upon mortgage loan applicants with late payments after bankruptcy and/or foreclosure. Lenders consider mortgage applicants with late payments after bankruptcy and/or a housing event as second offenders. Many lenders will not approve any mortgage loan applicants with late payments after bankruptcy and/or foreclosure. This holds true as long as the bankruptcy and/or housing event are reporting on their credit reports. This holds true even though they get an approve/eligible per automated underwriting system (AUS).

What Options Do I Have For a Mortgage Approval With Late Payments After Bankruptcy and Foreclosure

One of two late payments after bankruptcy and/or a housing event is not always a deal killer. You can still get an approve/eligible per automated underwriting system (AUS) with one or two late payments after bankruptcy and/or a housing event. However, GCA Forums Mortgage Group has no lender overlays on government and conventional loans. As long as the mortgage loan applicant can get an approve/eligible per automated underwriting system (AUS), GCA Forums Mortgage Group will do the loan. We have zero lender overlays on FHA, VA, USDA, and Conventional loans.

Mortgage Approval With Late Payments in The Past 12 Months

Recent late payment on mortgage payments can be a deal killer.

• Homeowners who currently sold a home and paid off the mortgage balance but had late payments on mortgage payments may have an issue
• Even though homeowner paid off the outstanding mortgage loan balance, new lenders want to see past 12 months mortgage payment history
• Many home buyers do not understand why it should be a problem if the mortgage is paid off
• The fact of the matter is that it is a major problem
• One 30 days late payment in the past 12 months on a past mortgage payment can be alright
• But multiple late payments on mortgage payments will most likely disqualify chances of a new mortgage
• Late payment on mortgage payments may need to get seasoned for 12 months to get an automated underwriting system approval

The Importance of Recent on-Time Payments

You can have prior bad credit and lower credit scores. However, lenders want to see timely payments in the past 12 to 24 months in order to approve you for a home mortgage. Timely payments in the past 12 to 24 months shows financial responsibility of borrowers. You can have outstanding collections and/or charged-off accounts and get an approve/eligible per automated underwriting system. This holds true as long as you have been timely on all of your payments in the past 12 to 24 months.

How Credit Profile Is Analyzed By AUS

Payment history, credit scores, and/or credit profiles do not matter on reverse mortgages. However, FHA, VA, USDA, and Conventional loans require an approve/eligible per automated underwriting system (AUS). The key in getting an approve/eligible per automated underwriting system is having timely payments in the past 12 months. However, you can still get an approve/eligible with one or two late payments in the past 12 months.

The Key In Getting An Approve/Eligible Per Automated Underwriting System

In general, you need timely payments on all monthly debts that report on credit reports to get an AUS approval:

• However, one or two late payments are not always a deal killer
• FHA loans allow two times 30 days late on a mortgage to get an approve/eligible per automated underwriting system on a purchase and/or a rate and term refinance
• You cannot have have no more than two  times 30 day late payments in the past 30 days
• You need to have 12 months on time payments on all mortgage payments on cash-out FHA and VA loans
• Once a case number is assigned, seasoning is measured from the case number assignment date

Properties mortgaged less than 12 months but more than 6 months from application date are allowed provided:

• The mortgage payment history shows max 0x30 for the number of months it has been paid

Mortgage Approval With Late Payments on FHA and VA High-Balance Loans

With high balance FHA and VA loans, a maximum of one time 30-day late payment on a mortgage is allowed on purchase and rate and term refinance mortgage transactions. However, you cannot have any late payments on FHA and VA high-balance loans to get a cash-out refinance on FHA and VA high balance loans. Maximum 1×30 in 12 months prior to credit report date on purchase and rate and term refinance FHA and VA high-balance loans. High-Balance FHA and VA loans have stricter agency mortgage guidelines. Mortgage rates are higher on high-balance FHA and VA loans since they are considered riskier loans.

Mortgage Approval With Late Payments on Installment and Housing Payments on Conventional Loans

Installment And Housing Payments On Conventional Loans:

• You cannot have any late payments in the past 12 months to get an approve/eligible per automated underwriting system on conventional loans
• This holds true on mortgage late payments as well as other credit tradelines
• You cannot have any more than 2 x 30 day late payments allowed in the past 13-24 months to get an approve/eligible per automated underwriting system on conventional loans
• To get an approve/eligible on conventional loans, you cannot have any major derogatory credit on REVOLVING accounts in the past 12 months

HUD, the parent of FHA, has more lenient agency guidelines on late payments in the past 12 to 24 months to get an approve/eligible per automated underwriting system:

Here are the agency guidelines on FHA loans with regards to late payments:

• Mortgage loan applicants are allowed up to 3 x 60 day late payments OR 1 x 90-day late payment on revolving credit cards to get an approve/eligible per automated underwriting system
• NO Non-Medical collections in the past 12 months

120 Day Mortgage Late Payments

Borrowers who were late 120 or more days on mortgage payments can still qualify for a mortgage loan. However, many lenders will consider a 120 day late on a mortgage payment the same as a foreclosure and/or pre-foreclosure. This is not correct. A 120 day late mortgage payment is not the same as a pre-foreclosure and/or foreclosure. On FHA and VA loans,  a 120 day mortgage late payment is allowed in the past three years from the date of a new mortgage loan application. This holds true if the current FHA and/or VA loan have been brought current. An up to date verification of mortgage is required reflecting the mortgage late payment has been brought up to date. Show the reason for the late payments and the 120-day late payment has been corrected. 

Verification of Mortgage: VOM

Homeowners who sold the current home and are purchasing a new home, current mortgage loan payment history will be reflected on a credit report.

• If current mortgage payments reflect timely payments on the credit report, the new lender will request verification of mortgage, also referred to as a VOM
• If mortgage payment history is not reflected on credit reports, the new lender will request verification of mortgage even though the loan balance is paid off
• A credit supplement will need to be done by the new lender if mortgage payment history is not on credit report
• Need to provide proof of past 12 months mortgage payments via providing them with canceled checks
• The new mortgage lender will consult with a third party credit vendor to reflect timely payments on the credit report
• The third party credit vendor will contact the previous mortgage lender and ask for verification of mortgage.
• Need to be timely on the past 12 months mortgage payments even with zero balance due to selling home
• Homeowners not been timely with mortgage payments prior to selling home and paying off the mortgage balance will have an issue
• To be eligible for a new mortgage loan, borrowers need to prove they have been timely with prior mortgage payments for the past 12 months
• Some lenders may accept a one time 30-day late payment in the past 12 months
• But homeowners who have been delinquent consistently on mortgage payments may not be eligible for a new loan until there has been a 12-month seasoning since last late payment on a mortgage

Solutions For Mortgage Approval With Late Payments

Many homeowners who have sold their homes and need to purchase a new home but had late payments on the prior mortgage in the past 12 months often have trouble qualifying for a new mortgage. They still have trouble qualifying for a new mortgage even though the prior mortgage is paid off. However, GCA Forums Mortgage Group has a solution. If you have a 20% down payment, you can qualify for a non-QM loan. Non-QM lenders do allow late payments in the past 12 months. However, a larger down payment is required. Use the non-QM financing as a bridge loan and refinance the higher non-QM mortgage rate into a government and/or conventional loan once you are able to get an approve/eligible per automated underwriting system.

This post will talk about what getting mortgage approval with late payments looks like, so without further ado, here’s the FAQ:

 FAQ on Mortgage Approval With Late Payments

Is It Possible to Secure a Mortgage Loan Despite Late Payments?

Yes, it’s quite plausible to have late payments on your credit history still and get a mortgage. Still, it certainly depends on factors such as the timeframe of those payments and the number of times they were unpaid.

How Does a Late Payment Result in a Lower Credit Score?

Late payments can be a huge hit to your credit score. However, the impact depends on how long the payment has been outstanding (30, 60, or 90 days), as the more distant the payment is, the greater the impact.

What Type of Loans Can a Borrower Who Has Late Payments Apply For?

• FHA Loans are usually forgiving. Late repayment is sometimes allowed as long as it is not recent.
• VA Loans: This loan type allows for late payments under special conditions;
• Conventional Loans: These loans have many more requirements to be met; thus, if you have made recent late payments, you might need help to secure one.

How Many Years Do Late Payments Last on My Credit Report?

Late payments can be reflected in your report for seven years. However, over the years, its effect on your credit score decreases, especially when you demonstrate healthy credit behavior after the late payment.

Apart From My Credit Score, What Are The Lenders Evaluating Other Factors?

Lenders can but are not limited to focus on:

• Your Current Payment Behavior: Working late or working non-payments for this late payment
• Numbers such as Debt-to-Income Ration
• Your years in the highly competitive job market and your stability.
• Overall financial status, which includes income and assets.

Can I Obtain a Mortgage if My Account Defaults For Several Years?

Yes, it has been several years since you made the necessary payments and have made timely payments. In that case, the lenders may be more flexible.

If there is a Risk That My Application Will Be Rejected, What Other Things Can I Do To Increase My Chances of Getting Approved?

• Boost your credit rating because many lenders want to see your credit score.
• Bring Your Explanations: Be ready to say the reasons why you failed to pay on time, together with the relevant documents.
• Increase your downpayment: Explain your credit history and say you are making a big down payment to improve it.
• Get a cosigner: This helps you classify the loan if your cosine has a good credit score.

How Can the Recency of Late Payments Jeopardize My Mortgage Application?

Normally, payments made late within 12 months are considered significant. An age of more than a year can sometimes influence, but only a little, especially if it has been compensated recently.

What Measures Must I Take if I Am Currently on Forbearance or Deferment?

If you are on forbearance or deferment, it might make your situation a little tougher when applying for a mortgage. Most contractors expect regular payments to be submitted. So, get in touch with potential lenders for advice on the matter.

When Would Be the Best Time to Apply for a Mortgage to Utilize my Improved Credit?

Certainly, you should wait and have your credit report improved before submitting your application. In that case, it might open better mortgage and interest rates. Still, if you urgently want to buy a house soon, applying for it might help, factoring in the other compensating factors.

For the most part, getting a mortgage with late payments is tough, but do not take this to mean that it is out of the realm of possibility. Approval is possible if one is willing to understand the key factors lenders look for and take active measures to appeal their case. Finally, speaking to a mortgage professional before taking any action is always recommended so you will have guidance that corresponds with your current circumstances.