Mortgage With Late Payments In The Past 12 Months
This blog will cover whether homebuyers can qualify for a mortgage with late payments. One of the main reasons for a mortgage loan denial is recent late payments.
Borrowers can qualify for a mortgage with prior bad credit. They can have unpaid collections, charge-off accounts, prior late payments, bad credit, and low credit scores. But the key to getting a mortgage loan approval is to have timely payments in the past 12 months.
That’s because it’s difficult to convince a lender that old bad credit problems are behind you if you’re still missing payments. It is possible to qualify for a mortgage with late payments. But you probably need a lender that does not add underwriting overlays. Non-QM Mortgage Brokers are one of those lenders. We can help our clients qualify for a mortgage with late payments. FHA and non-QM loans are the best solutions for getting a mortgage with late payments. The following paragraphs cover qualifying and getting approved for a mortgage with late payments.
See if you qualify in 5 painless minutes.
Late Payments After Bankruptcy or Foreclosure
Late payments after bankruptcy and housing events such as foreclosure or a short sale can derail your mortgage application. To approve a mortgage after foreclosure or bankruptcy, most lenders want to know that your credit problems are unlikely to occur again. That’s hard to prove if you don’t pay your bills on time. You can have prior bad credit, outstanding collections, and charged-off accounts without paying the outstanding debt. However, lenders want to see you have been timely on all of your bills for the past 12 months.
Is It Possible To Qualify for a Mortgage With Late Payments?
So how is it possible to qualify for a mortgage with late payments? It depends on your entire file and how an automated underwriting system (AUS) weighs all the parts of your application. If an AUS issues an approval, and your lender does not add “overlays” to its guidelines, you can close a mortgage with late payments.
AUS Approval Versus Lender Overlays
What are “overlays?” Lender overlays are additional mortgage requirements above and beyond FHA, VA, USDA, Fannie Mae, and Freddie Mac.
Non-QM Mortgage Brokers is a mortgage company licensed in multiple states with no lender overlays for government-backed and conventional loans.
If the borrower receives approval from an AUS, Non-QM Mortgage Brokers can close the loan. If your file can only be underwritten manually, you’ll need 24 months of on-time payments to qualify for most mortgage programs.
How Do Most Mortgage Lenders View Late Payments?
Residential lenders frown upon late payments when they review a borrower’s overall credit report.
Many lenders will not qualify for a mortgage with late payments for borrowers who had a late payment after bankruptcy or foreclosure.
Lenders often view borrowers who had any late payments after bankruptcy and foreclosure as repeat offenders. They will not go further with the loan process even though they have an approve/eligible per AUS.
Most Lenders and AUS Will Normally Approve Timely Payments In the Past 12 Months
Many lenders will not accept borrowers with late payments in the past 12 months. The history of late payments is viewed as financially irresponsible. Most underwriters will use late payments against borrowers in denying a mortgage loan.
AUS does not impose human judgment, only mathematical decisions. It’s just a formula.
The software may overlook late payments if your down payment is large, you have a lot of reserves in your bank accounts, your job is stable, and your earnings are high, or your overall credit rating is good despite recent late payments.
What Can I Do To Qualify for Mortgage With Late Payments
The first step you should take is to request a credit report from all three credit reporting agencies;
- Transunion
- Equifax
- Experian
Carefully review each credit report for late payments:
- A recent late payment will substantially drop credit scores,
- The good news is that as time passes, credit scores will gradually improve and have less impact on credit scores
- If you overlooked a bill but otherwise had a great payment history with a creditor, ask them to remove the late payment from your credit report.
- If it were the only late payment, many creditors would delete the late payment,
Creditors will be less likely to help if you have a history of late payments with them.
Lender Underwriting Guidelines on Late Payments
Conventional loans are a little more strict than FHA loans on getting AUS approval to qualify for mortgage with late payments. Fannie Mae’s official guidance for lenders concerning late payments on a credit report states the following:
If you have late payments, you are unlikely to get approved if you have applied for or opened new accounts and have high balances on your existing accounts.
If you can come up with a good letter of explanation for late payments, you can increase your chances of loan approval. For those who had multiple recent late payments, it might not be easy to qualify for a conventional loan. However, an FHA loan might be a decent option.
Manual Underwriting With Late Payments
Not every applicant qualifies for automated underwriting. You may not have enough credit history or are self-employed, and your income dropped substantially.
Your credit report may be wrong because of identity theft. Or the system indicates that it cannot issue a decision. These files must be downgraded to manual underwriting.
You need 24 months of timely payments on manual underwriting on FHA loans and 12 months of timely payments on VA loans. However, the Team at Non-QM Mortgage Brokers are experts in helping borrowers qualify for mortgage with late payments.
Can I Qualify for a Mortgage With Late Payments on Manual Underwriting?
Manual underwriting requires timely payments in the past 24 months on FHA loans and timely payments for the past 12 months on VA loans. The mortgage underwriter has a lot of power using underwriter discretion.
Mortgage underwriters have a lot of underwriter discretion on manual underwrites. If you have extenuating circumstances, the underwriter can use their discretion and approve you on a manual underwrite with late payments.
On manual underwrites, borrowers cannot have any late payments in the past 12 months. At Non-QM Mortgage Brokers, 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 us at Non-QM Mortgage Brokers at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are experts in helping borrowers qualify for a mortgage with late payments.
