can i get an fha loan if i have late payments

Can I Get an FHA Loan If I Have Late Payments?

If you have late payments on your credit report, it may be hard to get a mortgage. They will be seen as red flags by many lenders, even if your credit score is good otherwise. However, if you want an FHA loan, you might still be able to get one even if you have not paid your bills on time recently.

What is an FHA Loan?

An FHA loan is a government-backed mortgage insured by the Federal Housing Administration (FHA) These loans are popular among first-time homebuyers and borrowers with less-than-perfect credit because they offer more flexible qualification guidelines than conventional loans

For instance, FHA loans only need a 3% down payment and accept credit scores as low as 2050%. They can be a great choice if you don’t have a lot of money saved for a down payment or if you have late payments or other marks on your credit report.

FHA Loan Requirements for Late Payments

The FHA does let people get loans even if they have recently been late on payments. But there are some specific rules and requirements that lenders will look at when they look at your late payments.

• Number of late payments – The FHA usually allows up to 1×30 day late payment per year. Multiple 30+ day late payments are more concerning.

• Severity of lateness – Payments that are 60, 90 days or more past due are viewed more negatively than 30 day late payments.

• Type of account: Not paying your mortgage on time is taken more seriously than not paying your credit cards or other bills on time.

• Timeframe – Late payments that are more recent (in the last 6-12 months) raise more red flags than older late payments.

So even though the FHA does allow some late payments, having too many, especially severe and recent late mortgage payments, can still disqualify you.

Tips for Qualifying for an FHA Loan with Late Payments

If you want to improve your chances of getting approved for an FHA loan with late payments, here are some tips:

• Let late payments age – Waiting 6-12 months after the late payments can help strengthen your case. This shows you’ve gotten back on track.

• Explain any extenuating circumstances – If late payments were due to a temporary hardship like job loss or illness that you’ve recovered from, explain this in a letter to the lender.

• Show solid payment history before/after – Highlight your history of on-time payments before and after the late payments to offset any concerns.

• Improve other aspects of your application – Boost your credit score, increase your down payment, lower your debt-to-income ratio, etc. to balance out the late payments.

• Consider manual underwriting – FHA loans can be manually underwritten, where a person reviews your entire application holistically, instead of just looking at credit scores/history. This gives you the opportunity to fully explain your situation.

In many cases, with the right strategies, you can get an FHA loan approved even with some late payments in the last 6-12 months. It’s all about making a strong case for why you deserve the loan.

What if I Have Late Mortgage Payments?

Having late payments on a previous mortgage is one of the biggest obstacles to qualifying for a new FHA loan. The FHA guidelines state:

“The lender must document the reason for approving a mortgage when the borrower has 0x30 mortgage lates in the previous 12 months.”

This suggests even one 30-day late mortgage payment within the past year requires significant documentation and explanation to get approved. Some tips if you have late mortgage payments include:

• Wait 12 months from the last late mortgage payment
• Obtain an AUS approval despite the late mortgage payments
• Provide a meticulous letter explaining the reason for hardship, how you’ve recovered your finances, and arguing why you are still a good risk
• Have as many other positive factors in your application as possible – high credit, low DTI, reserves etc.

It can be done, but expect an uphill battle if you need an FHA loan but have recent late mortgage payments. Extra effort will be required to convince the lender to take a chance on your application.

What if I Have Late Payments After Bankruptcy/Foreclosure?

Late payments that occur after a bankruptcy, foreclosure, or short sale are called “second offenses” by the FHA, and they make getting a new FHA-insured mortgage very difficult.

The FHA states that borrowers may not be able to qualify for a new FHA loan for up to 3 years after a foreclosure or bankruptcy if additional late payments or other major derogatory credit events occurred.

If you have late payments that happened after a previous bankruptcy or foreclosure, you will most likely need to:

• Wait at least 3 years from the date of bankruptcy discharge or foreclosure
• Go through manual underwriting so you can fully explain the situation
• Have perfect credit with no late payments at all for the last 12 months minimum
• Verify the late payments were due to extenuating circumstances out of your control
• Provide documentation of the reason for hardship resulting in late payments

Overcoming a “second offense” is one of the biggest challenges borrowers with less-than-perfect credit face when trying to get an FHA loan. Make sure you are fully prepared before applying.

The Bottom Line

Yes, it is possible to qualify for an FHA loan if you have late payments – even some recent late payments. FHA loans are designed to be more forgiving of credit blemishes than conventional loans.

However, you will need to make a convincing case to the lender if you have multiple 30+ day late payments within the past 6-12 months. The more recent, frequent, and severe the late payments are, the more difficult it will be to get approved. Bringing other positive factors to strengthen your application is key.

If you strategically address any late payments through explanations, waiting periods, and offsetting strengths in your application, an FHA loan can still help you achieve homeownership. Just partner with a knowledgeable lender that understands FHA guidelines and knows how to position your application for approval.