FHA or Conventional? Some lates

[Anonymous]

Which is my better option:
I have 1 of my 5 cc with a 30-59 day late back in April of 2019.
Also, I had a student loan with that went 90days late back in May of 2019, but was refinanced in July. So the lates are showing on a closed/refinanced previous loan.
From my understanding FHA loans don't like lates within the last 12 mths. I could probably get past the cc late of 30 days with a letter. But what I'm wondering is do they still take in account for a refinanced/closed loan as with mine? My Mortgage scores are all above 640s. And I do have other tradelines and installment loans that are revolving great, great payment history.
TIA

[Mortgage-Specialist]

Many people believe that it's an FHA guideline that you must have a clean payment history within the past 12 months. Ive even heard lenders say it. It is not an FHA guideline but that is in fact an overlay that many lenders have for FHA as well as conventional. It is a regular occurence for us to approve buyers who have late payments within the past 12 months.

The 90 day late which happened so recently reduces your approval chances but it is still possible. Having reserves and lower debt ratios can offset the recent lates. Or a larger down payment. I see mid 500 scores with recent late payments approved (FHA) but with 10 or 15% down payment. It just all depends what triggers the automated underwriting system.

[Anonymous]

Another quick question.
How long do funds need to be in my account if they were inherited? And me being a beneficiary not the main, I received the funds once I have the amount I need to put down, and also reserves in my account for unforeseen circumstances or my safety net. I've read that lenders like to see them in your account for months prior to closing

[VALoanMaster]

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@Anonymous wrote:
Another quick question.
How long do funds need to be in my account if they were inherited? And me being a beneficiary not the main, I received the funds once I have the amount I need to put down, and also reserves in my account for unforeseen circumstances or my safety net. I've read that lenders like to see them in your account for months prior to closing

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I agree with Mortgage Specialist but they left out some important info.

1) You need to get an approval through an automated underwriting system (AUS) in most case because the guidelines for a manual underwrite are a little more restrictive.

2) Even if you do get an approval through an AUS, there are things that the underwriter has to look for that would require them to down grade the loan to a manual u/w. If that happens, the 90 day late payments will likely cause an u/w to deny the loan.

I just recently was able to approve a client with a 509 score and a ton of recent derogatory hits on their credit simply because they were able to put 15% down of their own funds.

This brings me to your follow up question regarding how long funds need to be in your account. FHA recently updated the automated underwriting systems to make it more difficult for loans to get approved when a DPA or gift funds are used for the down payment. With that in mind, you would need to have the money in your account for 60 days in order to consider them your funds.

[jff]

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Can you elaborate more on potential issues with FHA / Gift money used for downpayment?

@VALoanMaster wrote:

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@Anonymous wrote:
Another quick question.
How long do funds need to be in my account if they were inherited? And me being a beneficiary not the main, I received the funds once I have the amount I need to put down, and also reserves in my account for unforeseen circumstances or my safety net. I've read that lenders like to see them in your account for months prior to closing

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I agree with Mortgage Specialist but they left out some important info.

1) You need to get an approval through an automated underwriting system (AUS) in most case because the guidelines for a manual underwrite are a little more restrictive.

2) Even if you do get an approval through an AUS, there are things that the underwriter has to look for that would require them to down grade the loan to a manual u/w. If that happens, the 90 day late payments will likely cause an u/w to deny the loan.

I just recently was able to approve a client with a 509 score and a ton of recent derogatory hits on their credit simply because they were able to put 15% down of their own funds.

This brings me to your follow up question regarding how long funds need to be in your account. FHA recently updated the automated underwriting systems to make it more difficult for loans to get approved when a DPA or gift funds are used for the down payment. With that in mind, you would need to have the money in your account for 60 days in order to consider them your funds.

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[Anonymous]

Thanks you! Even if they were inherited funds? Like death benefits? And what if I were to out 20% or more down on an FHA loan. Would that help with UW denying? Or am I sort of stuck and have to wait 12mths from my last late payment? Even though those lates are on closed out paid off accounts

[JVille]

If these funds are actually Life Insurance proceeds “In your name” as beneficiarary. Or an actual Inheritance and not mom just giving you Money from her inheritance. You will be required to provide proof of the specifics.
Then it really doesn’t matter. But easiest is to have funds in the bank so that the two most recent stmts show no deposits other than payroll. Cleaner and requires no documentation and letters of explanation.
The last payments in the last 6 months are an issue and I’m not sure they can be over come. But you never know, but your letter explaining these two lates needs to be award winning. You should sit down and give some thoughts about what you are going to say in that letter.