Bad Credit Mortgage Loans Qualification Requirements
In this article, we will discuss and cover bad credit mortgage loans and qualification requirements. Mortgage borrowers with prior bad credit such as prior bankruptcy, foreclosure, deed-in-lieu, short sale, unpaid collections, judgments, tax liens, and charge-offs can qualify for bad credit mortgage loans. This holds true as long as they have rebuilt and re-established credit after their period of bad credit. Lenders understand people can go through bad times. In the following paragraphs, we will cover qualifying and getting approved for bad credit mortgage loans.
What Is The Lowest Credit Score For a Mortgage Approval?
If you have been timely on all of your payments in the past 12 months on all of your monthly debt payments, we can help you qualify for an FHA and VA loan with credit scores down to 500 FICO. One of the frequently asked questions at Gustan Cho Associates is what is the lowest credit score can you get approved for a mortgage with?
Over 80% of our clients are folks who could not qualify at other lenders. It is understandable to have prior bad credit, outstanding collections, charge-offs, late payments, and other derogatory credit tradelines.
However, it is important to have timely payments in the past 12 months to get an approve/eligible per automated underwriting system approval. In the following paragraphs, we will be covering qualifying for bad credit mortgage loans and qualification requirements.
Mortgage After Loss of Income due to Unemployment
Loss of jobs or businesses will stop the income stream. With an interruption in income due to unemployment, people cannot pay their monthly bills. One of the frequently asked questions at Gustan Cho Associates is can you get a mortgage after being unemployed and have re-established yourself? Of course, you can. That is what the team at Gustan Cho Associates are experts in. When people cannot pay their monthly debt payments, this is when their credit takes a turn for the worse. However, most people recover. They get new jobs or some change career paths and make more money. Others file for bankruptcy and get a fresh start in their financial life.
Re-established Credit After Bad Credit
Lenders want to see people rebuild and re-establish their credit after a period of bad credit. Unpaid collections or charged-off accounts do not have to be paid. Mortgage lenders do want to see timely payments in the past 12 to 24 months. Having timely payments in the past 12 to 24 months is key in getting approve/eligible per the automated underwriting system.
Getting Approved For a Mortgage With Bad Credit
Borrowers can qualify for a home mortgage with prior bad credit. The key to getting qualified and approved is to have re-established credit after bad credit. Homebuyers who want to purchase a home can qualify with many bad credit mortgage loan programs for borrowers with less than perfect credit.
Over 80% of our clients at Gustan Cho Associates, Inc. are folks who could not qualify at other mortgage companies because of the lender overlays or because the lender did not have the loan program the borrower was looking for.
Not all mortgage lenders have the same lending requirements on the same loan program. There are many qualified homebuyers who have the down payment, and closing costs, and are able to afford to be homeowners. However, cannot qualify for a mortgage with many lenders due to their overlays.
Mortgage Loan Programs For Home Buyers
Gustan Cho Associates has a national reputation for being a one-stop mortgage shop. This is because we have no lender overlays on government and conventional loans. Borrowers who cannot qualify for traditional government and conventional loan programs can qualify with our non-QM loans. Some of our most popular loan programs include non-QM and alternative financing mortgage programs.
Most Popular Traditional Loan Programs
Here are the most popular loan programs:
- FHA Loans
- VA Loans
- USDA Loans
- Conventional Loans
- NON-QM Loans
- Non-QM Mortgages one day out of bankruptcy
- Bank Statement Mortgage Loans For Self-Employed Borrowers
- Asset-depletion mortgages
- P and L no doc stated income mortgages
Role of The Federal Housing Administration
FHA mortgage loans are the most popular loan programs for home buyers seeking bad credit mortgage loans and first-time home buyers than any other loan program. HUD is not a lender but a government agency. The United States Department of Housing and Urban Development (HUD) is the parent of FHA.
Benefits of FHA Loans
The role of the Federal Housing Administration (FHA) is to insure owner-occupant mortgages originated and funded by banks and private mortgage companies in the event Borrowers default on their FHA loans. HUD will insure the lender for the loss due to foreclosure. Due to the HUD Guarantee against defaulted loans lenders are willing to fund FHA loans with low down payments and low mortgage rates. Borrowers can qualify for FHA loans after bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale after meeting waiting period requirements. Borrowers do not have to pay outstanding collections and charge off accounts to qualify for FHA loans.
FHA Bad Credit Mortgage Loans
FHA-insured mortgage loans make those who have had prior bad credit become homeowners. However, most lenders do want to see some established credit after the period of bad credit has been over. Most lenders want to see timely payments in the past 12 months, re-established credit, and no overdrafts in the past 12 months.
One or two late payments and one or two overdrafts do not mean an automatic mortgage loan disqualification but a good letter of explanation will be required.
Bad credit mortgage loans are extremely popular due to the recent economic and banking collapse and there is life after bad credit. In the paragraphs below are some general guidelines for bad credit mortgage loans.
Bad Credit Mortgage Loans Eligibility Requirements
FHA loans are the most popular bad credit mortgage loans. The minimum credit scores on FHA loans are FICO and above. For borrowers with credit scores between 500 and 579 FICO, a minimum down payment of 10% is required. To qualify for a minimum down payment of 3.5%, the minimum credit score required is 580 FICO or higher. Non-traditional credit accepted is accepted for those who do not have installment loans or revolving credit.
Mortgage Loans With No Credit Scores
Having on credit scores is like having bad credit. Many homebuyers often find it challenging to find a lender willing to help them get qualified and pre-approved without a credit score. You will run into a situation you do not have a credit score if you do not have any active credit tradelines. Gustan Cho Associates can help borrowers with no active credit tradelines by using non-traditional credit. Non-traditional credit is credit such as rental verification, utility payments, phone payments, and other scheduled monthly payments that are not reported on the credit reporting agencies and can be used in lieu of traditional credit tradelines.
Can I Get a Home Mortgage With Bad Credit and Little Down Payment?
Gustan Cho Associates specializes in helping home buyers with 3.5% down payment FHA loans. For a 3.5% down payment home purchase FHA loan, a minimum of 580 FICO credit score is required. Gustan Cho Associates are experts with no overlay bad credit mortgage loans. Borrowers with an Automated Underwriting System approval by Fannie Mae can close their loan in 30 days or less. On FHA loans, the maximum front-end and back-end DTI is 46.9%/ 56.9% debt-to-income ratio. Rental history is not needed unless conditioned by AUS or if it is a VA or FHA manual underwriting file.
Conventional versus FHA Loans
There are instances where a borrower will qualify for Conventional loans but not FHA loans. For borrowers who had mortgages as included in their Chapter 7 Bankruptcy, there is a four-year waiting period from the discharged date of the Bankruptcy and the recorded date of the foreclosure can happen at a later time. The four-year waiting period clock on conventional loans starts from the discharged date of Chapter 7 and not the recorded date of the foreclosure. However, with FHA loans, there is a three-year waiting period from the recorded date of the foreclosure which is past the discharged date of the Chapter 7 Bankruptcy. This is the case where borrowers with mortgage part of Chapter 7 Bankruptcy can qualify for Conventional loans but not FHA loans.
Apply For a Mortgage: Click Here
Working With The Team at Gustan Cho Associates
Gustan Cho Associates Mortgage Group specializes in helping home buyers who have been denied by other lenders and are stressed during the mortgage process.
- Constant communication
- Borrowers will be working together with me from the time of application until clear to close
- Most bad credit mortgage loans are closed in 30 days or less
- Fast-track bad credit mortgage loans can be closed in 10 to 14 days as long as we can order a rush appraisal
- A 3.5% down payment with a score above 580, can be 100% gifted
- 10% with a score down to 500 can be 100% gifted
- $100 down for HUD-owned homes
- Also, offer Escrow hold back
- Lowest rates because we have volume incentives due to our mass origination numbers with our wholesale mortgage lenders
- Pre-approvals based on AUS underwriting no pre-qualification
- The seller can pay for buyers closing costs, taxes, insurance & MIP
- 6% max seller contribution with FHA and USDA loans
- 4% maximum seller contribution with VA loans
- Fixed or adjustable rates offered
- No prepayment penalty
- Bilingual if needed
- Also, have bilingual processors on site
- Can flip homes into FHA loans without the 91-day waiting period
- 580 min score for 2-4 units (new program)
- A 500-579 credit score requires a 10% down payment
- Gustan Cho Associates lends on manufactured homes
Qualifying For FHA Loans With Bad Credit
What are bad credit mortgage loans? Borrowers can qualify for bad credit mortgage loans. However, they need to have re-established credit for the past 12 months. HUD does not require outstanding collection accounts and charged-off accounts to be paid and having prior bad credit is fine. However, borrowers will need to approve/eligible per automated underwriting system findings. In order to get approve/eligible per AUS, borrowers need to have been timely on all of their payments in the past 12 months. One or two late payments are not deal killers but habitual late payments will be an issue.
Best Mortgage Lenders For Bad Credit With No Overlays
Homebuyers who need to qualify for bad credit home loans with a mortgage broker licensed in multiple states with no overlays on government and conventional loans can contact us at Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates is licensed in 48 states including Washington DC, Puerto Rico, and the United States Virgin Islands. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.
