In this post, we're talking about mortgage rates and if you can qualify if you have a late mortgage in your payment history. This is a situation that happens to a lot of folks, and we get calls all the time asking this question. In short, absolutely. It's still possible to get a mortgage if you've been late on one in the past. There are lots of reasons people are late. Sometimes the bank is miscommunicating their payments, sometimes it's a technology issue. It's not always in your hands.
One Late Payment? You Still Have Options
Think a late mortgage payment will hold you back? Discover what lenders really look for and how you can still secure mortgage approval. Let us guide you through the process.
What does the underwriter look at when it comes to approving you?
Well, the first thing they're going to be looking at is your full credit report. Unfortunately, the truth of the matter is, if you have a lot of late payments, if life has been tough financially, and if you haven't been able to make car payments or house payments, your credit is going to be low. But, if your late payment is an isolated event and you have one late mortgage, possibly two, and everything else is okay on your credit, chances are you're going to get approved. Basically, they want to know you're reliable. How would you feel if you were in their shoes?
How does the FHA handle late payments?
FHA financing is pretty tolerant. With them, you can have no more than two 30-day mortgage lates, which is when you make a payment right after the 30-day due period. Now, if you have a 60-day late, which is when you let 60 days go by and then you make a payment, you're going to run into a problem, since there are no programs that allow you to get a mortgage if you've had a 60-day late in the past 12 months.
How does Conventional Financing handle late payments?
Conventional Financing is a bit stricter than FHA. They only allow for one 30-day late. However, you are not guaranteed to be approved if you're under this line, but you will be eligible as long as you don't have no more than one 30-day late.
How are VA Loans impacted by late mortgage payments?
VA loans have the same policy as Conventional Financing when it comes to past late mortgage payments. You can only have one 30-day late.
Eligibility vs. Approval
Just because you are eligible, does not mean you're guaranteed to get approved for the loan. This is something that holds true for all these types of financing. If you have any questions about this, be sure to reach out at (602) 535-2171. We'd love to answer any questions you might have.
In Summary
With FHA allowing for two 30-day lates, versus the one for Conventional and VA, they're the most lenient. Our advice for borrowers is, when you call a lender, be real honest and up front if you have any mortgage lates. This will help us point you in the right direction and you'll be less likely to run into any trouble down the line.
If you have any questions about this or if you have any questions you'd like us to answer on our podcast, you can submit your questions using our contact form or give us a call at (602) 535-2171. Be sure to ask us for a free quote on your next mortgage. We'll personally work with you and help you through the whole process.
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Be sure to ask us for a free quote on your next mortgage. We'll personally work with you and help you through the whole process.
Frequently Asked Questions
How does Conventional Financing handle late payments?
How are VA Loans impacted by late mortgage payments?
Mortgage Brothers LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Mortgage Brothers NMLS 1007154, NMLS #210917 and 1618695. Equal Housing Opportunity.
Transcript of the Mortgage Brothers Podcast
Eddie Knoell: Welcome, everyone! This is the Mortgage Brothers Podcast Show.
Can You Qualify with a Late Payment? [00:05]
Eddie: Today, we're discussing a common question: Can you qualify for a mortgage if you've had a late mortgage payment?
Tom: It's a real concern for many borrowers. There are valid reasons for late payments, such as miscommunications with the bank or technology issues. For example, a borrower thought they set up auto-pay but ended up 34 days late.
Factors Impacting Mortgage Approval [01:10]
Eddie: If you've had multiple late payments, like missing car payments or other bills, your credit score is likely very low, and approval will be challenging.
Tom: However, if this is an isolated event, your chances are better. One or two late payments might not disqualify you entirely, depending on the loan program.
Understanding the Underwriter's Perspective [01:47]
Tom: Think of it like hiring a babysitter. If a babysitter admits to letting a toddler fall off a counter, you might look for someone else. Similarly, underwriters evaluate the risk of lending money to you based on past behavior.
Eddie: Mortgage lates are one of the most significant red flags for underwriters. Borrowers often underestimate how impactful a single 30-day late payment can be.
Loan Program Guidelines [04:00]
Here's how the major loan programs handle late payments:
1. FHA Loans:
- Allows up to two 30-day late payments in the past 12 months.
- Does not permit any 60-day late payments in the same period.
2. Conventional Loans:
- Allows only one 30-day late payment in the past 12 months.
- Stricter than FHA, but eligibility doesn't guarantee approval.
3. VA Loans:
- Similar to conventional loans, allowing just one 30-day late payment in the past 12 months.
Eligibility and Approval Comparison [05:37]
Tom: Being eligible doesn't mean you'll be approved. Your loan officer should provide clear answers during the pre-approval process, typically within a day or two.
Eddie: If a lender says, “Let's wait until underwriting to find out,” that's a red flag. You should get a solid answer during pre-approval.
Tips for Borrowers [07:11]
1. Be Honest:
- Inform your lender upfront about any mortgage lates. Keep the explanation brief and to the point.
2. Understand the Difference:
- Late payments differ from deferments or forbearances. Contact your lender if you're unsure about the specifics.
Tom: Honesty allows the lender to assess your situation accurately and determine if you're eligible for a new mortgage.
Final Thoughts [07:42]
Eddie: We hope this information has been helpful. If you like this content, subscribe to our channel and click the notification button.
Tom: And if you have questions, reach us using our contact form.
Contact Information
- Contact: Contact Form
- NMLS: 1007154
Disclaimer: This material is for informational purposes only. Consult your tax, legal, and accounting advisors before taking action.