Can Approved For a Home Loan With Recent Late Payments

This guide covers getting approved for a home loan with recent late payments. This blog was written to help borrowers qualifying for a 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.

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.

Getting approved for a home loan with recent late payments on your credit report can be challenging, but it’s not impossible. Here are some steps and considerations that can help you navigate this situation. Write a detailed letter explaining the circumstances that led to the late payments. This could include unexpected financial hardships like medical emergencies, job loss, or temporary reductions in income. Be honest and clear, providing any documentation that supports your explanation.

Getting Approved For a Home Loan With Recent Late Payments

Improve your credit score by correcting mistakes. Check your credit report for any inaccuracies affecting your score negatively. Dispute any errors you find with the credit bureaus. Paying down credit card balances can lower your credit utilization ratio, which is a fast way to improve your credit score. Avoid new credit.

Do not apply for any new credit leading up to your mortgage application, as this can lead to hard inquiries that might lower your score. Offer a larger down payment to reduce the lender’s risk.

A larger down payment can sometimes offset the negative impact of your recent credit history. Demonstrate stable employment and a steady income. A longer tenure at your current job can reassure lenders of your ability to repay the loan. Show that you have significant savings or reserves besides the down payment. This can help convince lenders that you will not default on your mortgage. Get Approved for a home loan with recent late payments

Getting Approved For a Home Loan With Recent Late Payments Considering Different Lenders

Different lenders have different criteria and tolerances for risk. Some, especially smaller community banks, credit unions, or specialized lenders, may be more willing to work with you despite your credit history. Consider government-backed loans such as those from the Federal Housing Administration (FHA), which are generally more lenient regarding credit history than conventional loans.

Consult with a Mortgage Broker

A mortgage broker can help you navigate your options and find a lender who may be willing to work with you despite your recent late payments. They have access to multiple lenders and might know of ones with more flexible qualifying criteria.

Wait and Improve Credit

If possible, delay your mortgage application to give yourself time to improve your credit standing. Continue making timely payments, reduce debts, and follow good credit habits. These steps can improve your chances of getting approved for a home loan even with recent late payments. Being proactive and demonstrating financial responsibility can go a long way in persuading lenders to approve your loan application.

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 homebuyers 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 borrower’s overall credit reportl. Lenders will review the borrower’s payment history. Lenders want to see that borrowers have recouped and re-established credit.

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.

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 creditl However, qualifying for a home loan with recent late payments after a bankruptcy or foreclosure or other significant life-changing events can be an issue if they have late payments after bankruptcy or foreclosure. There are two ways on how lenders will view recent late payments: Underwriters Discretion. Automated Underwriting System Findings. Click here to find a lenders for your mortgage loan

Home Loan With Recent Late Payments in the 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.

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.

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.

The Importance of Timely Payments in the Past 12 Months

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. The bottom line is a 30-day late payment on any credit payments can be a cause for a mortgage loan denial

Solutions on Qualifying For a 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.

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.

For borrowers who had a history of late payments with the particular creditor, the chances are extremely slim that they will remove it.  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 a Home Loan With Recent Late Payments

Lender overlays are additional mortgage requirements implemented by the individual lender that is above and beyond the minimum agency mortgage guidelines of HUD, VA, USDA, Fannie Mae, and Freddie Mac. A lender may deny a mortgage loan approval even if the borrower gets an approve/eligible from 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  lender overlays. Qualifying for a home loan with recent late payments can not be a problem with an approve/eligible per AUS.

Choose a lender with no overlays. 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. The team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays. Click here to get connect with  our team even in holicates