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

Dear UWB,

Whether you can qualify for a mortgage after having a few late payments in the past year depends on several factors, such as the lender's criteria, how delinquent you were and the overall strength of the rest of your credit history.

If you have a strong credit history aside from the recent late payments, you still may be able to obtain a mortgage loan, but you likely won't qualify for the best rates and terms available.

Qualifying for a Mortgage After Delinquency

Your payment history is the most important factor in your credit scores, and recent payment history has the most impact. Because your late payments happened in the past year, you may find that lenders offer you higher mortgage interest rates, which will in turn increase your monthly payments. That higher interest rate could cost you thousands of dollars over the life of the loan.

You may also be required to make a larger down payment. It's important to consider these factors when deciding whether it's best to apply for a mortgage now, or whether it might be beneficial to wait until your credit scores have had more time to recuperate.

How to Increase Your Credit Score

If you are planning to apply for a mortgage in the near future, focus on getting your credit in the best shape possible beforehand. Here are five steps to take to improve your credit before you apply for a new loan:

1. Review your credit reports. Know what's in your credit history. You can order a free copy of your credit report weekly from each of the three national credit bureaus (Experian, TransUnion and Equifax) at www.annualcreditreport.com. You can also view your Experian credit report for free at any time.
2. Check your credit score. You can order your Experian credit score for free online. Pay close attention to the risk factors provided with your score. These factors can help you understand what is affecting your score the most and what you can do to improve it.
3. Bring any past-due accounts current. If you are past due on any account, bring the account up to date before applying for a home loan. Past-due accounts will seriously hurt your credit score.
4. Pay down credit card balances. Your credit utilization rate, or amount of available credit you're using, is the second most important factor in calculating your credit scores, right after payment history. While you want a utilization rate below 30% to avoid hurting your credit scores, keep your utilization rate below 6% for the best scores.

Although it may take time and effort for your credit scores to recover fully, try not to be discouraged by those 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.

Thanks for asking,

Jennifer White, Consumer Education Specialist