The Mortgage Guy Weekly

How poor credit can impact getting a mortgage loan
With the recession the last few years, millions of Americans have been unable to pay all their bills on time.  Depending on the frequency, severity and in some cases, the cause, this will impact ones ability to get a mortgage loan.
If a credit problem was a bankruptcy you can generally apply for a mortgage loan to purchase a primary residence within 12-mos if there were extenuating circumstances such as a divorce, job loss, drastic drop in income or medical issue with FHA.  FHA loans are easier to qualify for than a conventional mortgage and they cost a bit more.  If there were no extenuating circumstances, one will likely have to wait 24-mo.  to get an FHA loan.
If you filed Chapter 7 bankruptcy you might be eligible for a mortgage within 24-months if there were extenuating circumstances or 48-months if there were not any.  If you filed chapter 13 (meaning you made payments to your creditors to partially satisfy your debts) you can apply for a primary residential purchase mortgage 24-months after discharge.  If you failed to make the payments as promised and the BK was eventually dismissed you would need to wait 48-months.
Now if you did not go bankrupt but had a foreclosure due to extenuating circumstances the waiting period is 36-months if you have at least 11% equity (for a refi) or 11% for a down payment.  If there were no extenuating circumstances the waiting period is seven years.
If you opted to surrender the property to the lender (and they were willing to accept) or had a short sale (where the lender allowed the property to be sold and accepted less than the amount owed for a payoff) the general waiting time is 2-years if there were extenuating circumstances or between two years and seven years if you have 10-20% down payment (or equity in the event of a refi).
Note all of the above pertain to the purchase of a primary residence.  If the property is to be a second home or investment property there is generally a  7-year waiting period regardless of the credit incident or cause.
In addition to the waiting period it is important that a borrower  have made every effort to re-establish credit, preferably with at least three trade lines that have a $1,000 credit limit or loan amount. 
In addition, the cost of your loan will be impacted by your credit score and loan-to-value and property type.
If your credit issues stem from a string of late payments on your mortgage, be aware that if you have more than 2-30 day late pays on your mortgage in the last twelve months you will generally not be able to get a mortgage loan.  If you have any 60-90 day late pays on your mortgage in the last 24-36 months you might have a problem as well.
Late payments on credit cards are scrutinized.  One or two won’t necessarily disqualify you from a loan but will impact your credit score, which will force a higher interest rate on your loan.

Call me at 970-748-0342 to discuss your mortgage requirements or click here to e-mail me a question! 

Here are links to a few of "the best of the Mortgage Guy" columns that you might find interesting and educational:

Financing a condo-tel property

The difference between a broker and a bank

Is an FHA loan right for you?

How do ARM's work?

New rules help retiree's qualify for a mortgage

Rolling in closing costs

Can you refinance if you owe more than the house is worth?

How a Reverse Mortgage works Oct 18, 2013

Your mortgage broker might pay you to refinance

New rules allow some protection for those facing foreclosure

Will Obamacare lower mortgage rates?

Tide may be turning on tight lending for some  Nov 16, 2013

New down payment rules Oct 23,2013

Expert who predicted housing crash now predicts boom times July 22,2013

Making sure your condo association is compliant with lending guidelines

Watching for ID theft on your tax returns

Plan for taxes as well as mortgage borrowing

Parking your money in your own garage might make sense





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