Can I Get a Mortgage With Late Payments On My Credit Report?

If you’re like many Americans, you might be thinking about borrowing money to buy a home. We often get asked whether a person can get a mortgage if they have late payments on their credit report. We will answer this question in much detail below.

Can I Get a Mortgage With Late Payments on My Credit Report?

You can still get a mortgage with late payments on your credit report, however, this depends on the strength of your credit report, the lender’s lending criteria, and how much damage you’ve done to your credit by making your payments late. Typically, the more late-payments and the longer the delinquencies, the more difficult it will be for you to get a mortgage. If you have strong credit despite having a few late payments, lenders may still be willing to offer you a mortgage at a decent interest rate and terms.

When determining whether to offer you a mortgage, lenders will review your credit report and place great emphasis on your past payment history. Payment history is important for mortgage lenders because it shows them how you’ve handled paying down debt in the past, which shows them how you are likely going to handle paying down your mortgage in the future. So, the better your payment history, the more likely you are to be approved for a mortgage. This is so because people who have paid their debts on time in the past are likely going to pay them on time in the future. The opposite applies, as well.

Having a late payment will raise some red flags for lenders, especially if the late payments are recent (within the past 12 months).

Nevertheless, as late payments age, not only will their impact on your credit score lessen, but old late payments will have less of an impact on a lender’s decision to lend you money. Recent late payments, however, will, unfortunately, impact your ability to get a mortgage.

If a lender sees that you have recent late payments on your credit report, they might require you to place a bigger down payment and/or you might have to pay a higher interest rate than would a lender who has never missed any payments on his or her credit cards and loans. So, when seeking to get a mortgage, you should consider all of these factors before applying.

Pro Tip – Some experts state that if you have any late payments, you should wait for at least 12 months before applying for a mortgage. This waiting period is done to establish a track record of on-time payments to encourage lenders to approve you for a home loan. Making on-time payments prior to applying for a mortgage is critical to ensure that the lender does not ask for large cash reserves, bigger down payment, or other income sources prior to approving you for a home loan. So, although you can still get a home mortgage with late payments, you may be asked for a bigger down payment or cash reserves prior to being approved. So, make your payments on time for the best chances to be approved.

How to Improve Your Credit Score & Get a Mortgage With Late Payments on Your Credit Report?

Here are a few tips on how to improve your credit score in order to get a mortgage with late payments on your credit report:

1. Make Timely Payments – Make all of your payments on all of your accounts on time. Your payment history accounts for 35% of your credit score and is the biggest factor that lenders look at when deciding to approve you for a mortgage. So, making timely payments will not only increase your credit score but will also increase your chances of being approved for a mortgage. If you have a late payment on your credit report, as the late payment ages and becomes older, its impact on your credit score will lessen and lenders will not view it as negative as a recent late payment. So, continue to make payments on your accounts and make sure that you do not make late payments for the best chance to be approved for a mortgage. Late payments will remain on your credit report for 7 years from the date you became late on your account. After 7 years it will be automatically removed from your credit report. That said, the impact of a late payment on your credit score and a lender’s decision to give you a mortgage lessen as the late payment ages.

2. Reduce Balances – The second thing you can do to improve your credit score and still get a mortgage despite having late payments on your credit report is to reduce the balances on your accounts. Your credit utilization (how much of your available credit you’re using) accounts for 35% of your credit score. So, a quick way to improve your credit score is to pay down the balances on your accounts. As a rule of thumb, you should strive to keep your account balances below 10% of your available credit, and to never exceed 30% utilization. If you exceed 30% of your available credit, you will notice a drop in your credit score because you’re using too much of your available credit. Your credit score will drop because utilizing too much credit tells lenders that you may be having financial troubles, and are therefore relying too much on your credit cards. So, a quick way to improve your credit score and qualify for a mortgage is too pay down your accounts as much as you possibly can.

3. Makes Paste Due Accounts Current – If you have accounts that are passed due and/or reported as late on your credit report, you should make them current so that when the lender reviews your credit report, you’re not behind on any payments, showing them that you’re financially responsible. Additionally, making a past due account current will help your credit score because past due account can cause a significant drop to your credit score.

4. Review Your Credit Report – If you’re not already in the habit of periodically reviewing your credit report, you should review it to ensure that there are no negative items bringing down your credit score. If you find an item that does not belong to you, you should dispute it to have it removed from your credit report. The dispute process typically takes a few days, but in some circumstances can take up to 30 days to complete.

How to Qualify For a Mortgage With Late Payments?

  1. Remove Late Payment – If you’re wondering what you can do to qualify for a mortgage with late payments on your credit report, the first thing you should do is to contact your creditor and lender and ask them to remove the late payment(s) from your credit report. Some lenders will be willing to work with you while others will not. You will probably have more luck with this method if you have a very good payment history and relationship with the lender. If you contact a lender and the representative refuses to remove your late payment, ask them to speak to their supervisor. Supervisors have more leeway when it comes to helping customers. Be polite and explain your situation to the supervisor. You may be surprised, but this could help you.

  2. Larger Down Payment – If you want to get a mortgage to buy a home, but you have late payments on your credit report, some lenders will still be willing to work with you if you agree to make a larger downpayment. The larger downpayment shows borrowers that you are creditworthy and likely to pay your mortgage payments on time since you’ve invested a lot of money in your home. Also, a combination of bad credit and a small down payment doesn’t play too well with lenders. So, this could be an option if you want to take out a loan to buy a home.

  3. Reduce Your Balances – Another way to show lenders that you’re creditworthy and should be approved for a mortgage is to pay down the balances on your accounts. This shows lenders that you have the cash to pay your debts and shows them that you’re not too reliant on credit.

Frequently Asked Questions (FAQs)

1. Can you buy a house with late payments?

Yes, you can still buy a house with late payments. However, recent late payments (less than 12 months old) will make it very difficult for you to buy a home. That said, you may still qualify for a mortgage, but the lender may require a bigger down payment.

2. Do missed payments affect your ability to get a mortgage?

Yes, late payments will make it difficult but not impossible to get a mortgage or home loan, especially if the late payments are recent. As late payments age and you make on-time payments on all your credit cards and loans, it’s impact on your ability to qualify for a mortgage will lessen until the late payment is automatically removed after 7 years.

3. Can you remove late payments from your credit report?

If a late payment is valid, meaning you were in fact late, it will be difficult to remove it from your credit report. This is so because the credit reporting bureaus are not obligated to remove accurate information from your credit file. You can contact the lender or creditor and ask for it to be removed. That said, if the late payment does not belong to you, you can file a dispute with the credit reporting bureau to remove it from your credit report. The credit reporting bureau will then investigate to determine whether the late payment is indeed valid. If it’s valid, it will remain on your credit report. However, if it is indeed inaccurate or does not belong to you, it will be removed.