Can I Still Get a Mortgage Loan With a Few Late Payments?

Can You Get a Mortgage if You Have Late Payments?

It's possible to get a mortgage if you have late payments in your credit file, but your options will likely be more limited than if you had 100% on-time payment history. The lender's rules, and the specifics of your late payment history, also play major roles.

For example, lenders of conventional mortgages are most concerned with late payments made in the past two years. Additionally, during mortgage underwriting, lenders will seek to determine whether late payments were one-off mistakes or part of a pattern.

They'll look at the rest of your credit history and consider you more of a risk if you also have recent hard credit inquiries or high credit utilization. Missed mortgage payments are assessed separately; you won't qualify for a conforming loan if you made one or more mortgage payments at least 60 days late in the past year.

When applying for a Federal Housing Administration (FHA) loan, a certain type of government-backed mortgage, lenders will consider your payment history acceptable if you have no missed housing or other installment loan payments in the past 12 months and a maximum of two missed payments—no more than 30 days late—in the past two years. Credit card late payments are only of concern to FHA lenders if they were made more than 90 days late, or if there were more than three payments made more than 60 days late.

Learn more: Can One 30-Day Late Payment Hurt Your Credit?

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How Long After a Missed Payment Can You Get a Mortgage?

The ideal time to wait depends on the type of mortgage you want and the nature of your missed payment.

For conventional loans, you will likely be in the clear after two years, but you could qualify sooner if there was only one late payment and the rest of your credit file is strong. That means you have low or no outstanding debt, no recent applications for new credit and you've maintained a long credit history.

Government-backed loans may be more lenient and require you to wait less time. FHA loans and VA loans, for example, require only one year of fully on-time payment history. Even if you do have late payments within the past year, providing documentation of extenuating circumstances surrounding it may convince the underwriter that you are not a credit risk and lead to approval.

How to Qualify for a Mortgage After Missing Payments

You can take steps to qualify for a mortgage after missing payments, which may make it more likely your application will be approved.

Even if you're approved, however, since late payments have a negative impact on your credit score, you may not be eligible for the most favorable interest rates and terms on a new mortgage. You may need to make a bigger down payment, pay more fees or settle for a lower loan amount if your credit score is compromised.

Lenders typically offer the lowest mortgage interest rates to borrowers with credit scores in the mid- to high-700s.

Here's how to get your credit ready for a mortgage application after missing payments:

• Catch up on payments as soon as possible. The longer a credit or loan payment is past due, the more worrisome it'll appear to lenders. As soon as you notice a payment is late, pay the bill right away; the late notation won't show on your credit report if you bring the account current within 30 days of the due date. But paying 30 days late is better than 60 days late, and 60 days is better than 90 days.
• Sign up for autopay. If you haven't already, set up automatic payments on all of your loan and credit card accounts so you never miss a payment. You may be able to change the due date on certain accounts so that you can spread out bill payments throughout the month and allow for more balanced cash flow.
• Avoid applications for new credit. Missed payments are less alarming to lenders if they're the only negative element of a credit report. Demonstrate that you're not seeking more credit than you can afford to pay down by avoiding applications for new credit. Hard inquiries stay on credit reports for two years but typically only affect FICO^® Scores^Θ for one year. To be safe, don't apply for new credit for 12 months before you apply for mortgage preapproval.
• Pay down credit card debt. Another way to show strong credit aside from missed payments is to pay down other types of debt, such as credit cards. Your credit utilization rate, or amount of available credit you're using on your credit cards, contributes heavily to the second most important factor in your credit scores: amounts owed. While a utilization rate below 30% is a solid goal, keep your utilization rate below 10% for the best credit scores.

Learn more: The Complete Guide on How to Get a Mortgage

Frequently Asked Questions

Building Credit After Late Payments

Although it may take time and effort for your credit scores to recover fully, don't be discouraged by past late payments. If you make all your payments on time going forward and keep your credit card balances low, you will demonstrate to potential lenders that you are now able to manage credit responsibly, and your credit scores will begin to reflect that. You may also be able to explain to lenders the circumstances that led to the late payments, improving your chances of approval.

To get an idea of where your credit stands, check your FICO^® Score and credit report for free from Experian. You'll get tips on steps you can make to help improve your score, giving you a leg up on your mortgage application.