Can You Get a Mortgage With Late Payments on Your Credit Report?


Mortgage for dream house

Purchasing a home is a great achievement because of how expensive homes are these days. Nothing beats the feeling of knowing that the roof over your head is yours. But this luxury often comes with a great price, a price that may involve applying for a mortgage loan.

You can get a mortgage with late payments on your credit report which might be very difficult. Depending on how severe your case is, there may be lenders who are willing to be more understanding of your financial situation.

As at March 2020, the median price of houses in the United States was a whopping $320,000. In the year 2017, it was about $200,000. Home prices seem to be skyrocketing each year and if it continues in this path. Owning a home without the help of a loan may turn out to be a major dilemma. 

Can You Get a Mortgage With Late Payments on Your Credit Report?

Most homeowners in the United States purchased their home with the aid of mortgage loans. The rising price of homes in the United States is one of the main reasons why individuals find it hard to make an outright remittance for the home of their dream. These people resort to mortgage loans in a bid to have a home of their own.

Obtaining a home loan from a bank or a lender isn’t as easy as it used to be. Lending requirements are much stringent now than they were some years back. This is because lenders want to be sure that you can handle monthly payments before you are offered a mortgage. So with a fine toothcomb, these people go through your finances, credit reports, credit score, payment history, credit history, etc., to satisfy their curiosity.

Do lenders look at closed accounts? Do they consider late payments on your credit report to ascertain if you are worthy of the loan? Of course they do! Though this varies for all lenders, but majority consider those criteria among others things such as your credit history, your credit scores, etc.

When you are ready to get a home loan, ensure you apply with a mortgage lender that is understanding. A lender who is benevolent enough to change your mortgage due date is better than one who insists that you stick to the date irrespective of your financial situation.

How Long After a Late Payment Can you Get a Mortgage?

Making late mortgage payments is not advisable. It doesn’t only affect your credit report, it also prevents lenders from considering your application. Probably if you are aware of what happens when you are 60 days late on mortgage, you will pay up in time without any hesitation whatsoever.

Late remittance will remain on your credit report for up to six years. This means that, within the six years, obtaining a mortgage loan may be very difficult. 

There are some lenders out there who will be eager to consider your mortgage application even after late remittance. Approaching the appropriate lender in the first place can save you time, cash, and can provide you with the ideal home.

Before lenders consider your loan application, they always evaluate your creditworthiness. They evaluate your payment history, credit reports, etc.  If they are satisfied with their findings, they will certainly offer you the loan, if they aren’t, they’ll turn down your application.   For instance, some lenders consider employment status before offering you a loan while others don’t. The criteria is different for every lender.

Can I Get a Mortgage With Missed Payments?

Missed payments can affect your credit record. They are often visible on your credit report for 6 years. This denotes that lenders can see that you’ve, at a time, missed a payment in this period.

If you’ve missed payments, this may make lenders assume that you are in some kind of financial trouble and may find it hard to refund any new credit payment should they offer you the loan. Though some lenders may consider your loan application, but finding such lenders is usually not easy.

If you missed a payment once, there is a huge chance that you can bounce back quickly. But if you’ve missed several consecutive payments, you may have problem finding a lender who’ll consider your loan application.  You must know that no lender will be willing to take any risk with his or her money. That is why they often scrutinize your finances to ensure that they don’t end up regretting their actions.

In summary, when you request for a mortgage, lenders often look at several factors, one of which is how you have handled your past credit; they then conclude on how likely you are to maintain your mortgage payments.

So, having a good credit and payment history is key to getting that loan application approved.

Can I Get an FHA Loan if I have Late Payments?

Missed Payments

If there is this beautiful home you wish to purchase and want to apply for a Federal Housing Administration (FHA) home loan to make that dream a reality, you have to scrutinize your credit report to ensure that it contains no info regarding late or missed mortgage payments, rent payments, utility bill payments, or even credit card payments.

Having late of missed payments can dent your hope of securing an FHA home loan. Late payments can also smear your credit score. A bad credit score won’t only halt your chances of securing an FHA loan, it can also act as a hindrance to securing loans such as personal loans, car loans, credit union loan etc.

FHA loans are simply loans that are backed by the government. This loan is insured by the Federal Housing Administration, also known as FHA. FHA loans are common with first-time home buyers. This type of loan is quite different from modern loans. To apply for an FHA loan, you need lower minimum credit scores including down payments.

As a potential borrower, what action can you take to mitigate the damage late payments can do on your chances of obtaining an FHA loan?

Evaluate your Credit Report Early:

If there exist any erratum concerning late payments on your credit report, you will need lots of time to manage those circumstances. Contesting late remittance on your report isn’t an easy, the process require the filling of complaints and the involvement of third parties in the case. Doing all these takes time, that is why it is best to start reviewing your credit data as soon as you are ready to apply for a mortgage loan.

The 12 Month Rule:

It is advised that you should request for an FHA loan with not less than 12 months of early payments for all financial commitment. Those 12 months should be equivalent to and including the month you made a request for the loan.

If peradventure, your credit statement displays errors or factual information that isn’t in error that is displayed as missed payments during this 12 month period, it may be the best to halt your credit application till you have a 12 months record of early payments for all financial commitments.

Will Mortgage Companies Remove Late Payments?

People make late mortgage payments for one reason or the other. Most times, it’s not always their fault, but no one cares. Some make early payments but due to some hitch along the way, the bank or loan servicer never saw it.

If you cite the right and reasonable reasons for making late payments, a mortgage company will remove late payments from your credit report. If these companies are not satisfied with your reasons, they will refuse. You have a 50/50 chance. You can make your reasons known via a goodwill letter.

There are some consequences that comes with making late mortgage payment. One of them is late fee charge, and it is even less significant than the other which is a drop in your credit score. As you know, late mortgage payments damages your credit score. Mortgage lenders and bank won’t consider a borrower who failed to pay his mortgage fees early in the past.

Due to the high rate in which homeowner make late remittance, some lenders and bank now allow one 30-day mortgage late in the past 24 months prior to a succeeding loan application.  Such measure only allows you to make late mortgage payments just once in the last two years.

If for some reasons, you have a late remittance on your credit history, you can write a goodwill letter to the mortgage company who made the derogatory remark on your credit report.

If for instance, a credit report wrongly stated that you missed a payment when you didn’t, you should file for a dispute rather than sending a goodwill letter.  

Conclusion:

In a nut shell, strive to ensure that you don’t make late mortgage payment. Being 60 days late on payment or 30 days late, could damage your credit history, credit score If you have lots of debts hanging around your neck, and you are finding it hard to repay these debts, you can seek professional assistance. This assistance comes in the form of programs that help people like you repay their debt without hardship. Lots of debtors have benefited from this program. You look into it and give it a try.

Also to ease your debt, you can take a debt consolidation loan. But you must know that for each amount of consolidation loan you take, there are pros and cons. For instance, a $50,000 debt consolidation loan comes with some pros and cons, the same goes with other amounts.

When it comes to loans, many people wonder why personal loans are smaller than other loans. Well, the simple reason is because they are short-term loans. To apply for this loan, you need to be aware of what banks consider before your loan application is approved. One of the factors is your payment history, your credit scores, credit mix, credit utilization ratio, etc.

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