Good income, 20% downpayment, good length of history, recent late payments...

[sugarmagnolia23]

I currently own a house, and have been in it for 13 years. I have 13 years left on my mortgage, and most of those years made extra payments which means I have good equity in the house. I have had the same employer for 26 years, long credit history, and my income is $170K. Last year, in November 2009, my daughter got a DUI and I made the decision to not pay my bills that month to pay a lawyer and keep her out of jail....well, what I thought was going to be a month or two of catching up turned into a year. There were legal fees, court costs, her bill payments after she lost her job, etc etc- What was once a year ago a CS of 750 has dropped to 600.

My question is this- I met a man who wants to consolidate and buy a new house together- he has a score of 800 but not enough income to qualify. So I understand that the loan would be based on my credit score and both our incomes- I have received conflicting information from mortgage brokers.... One says I just need to get my score to 620 and I would qualify, and another says that even though it seems I would qualify in every way if I get my score up -it does not make a difference because no lender will touch a loan if you have had a single mortgage late payment in 12 months. My home equity loan payment was late 10 times in a 14 month period. My actual mortgage was twice. The most recent of these was 1/11 on the equity line. I finally caught up in February after a year of juggling, and every line is on time since then. The only thing that was not affected by lates was my only actual cc- not one late in 20 years.

So, is it true that even if I paid all my debts except mortgage and equity that would be paid by sale of house, that a lender will still not accept me due to mortgage related lates?

My house will bring an equity of $180,000 and the house we would be buying is $510,000. I live in the LA area....

Any advice would be helpful- ThX

[Lel]

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@sugarmagnolia23 wrote:

I currently own a house, and have been in it for 13 years. I have 13 years left on my mortgage, and most of those years made extra payments which means I have good equity in the house. I have had the same employer for 26 years, long credit history, and my income is $170K. Last year, in November 2009, my daughter got a DUI and I made the decision to not pay my bills that month to pay a lawyer and keep her out of jail....well, what I thought was going to be a month or two of catching up turned into a year. There were legal fees, court costs, her bill payments after she lost her job, etc etc- What was once a year ago a CS of 750 has dropped to 600.

My question is this- I met a man who wants to consolidate and buy a new house together- he has a score of 800 but not enough income to qualify. So I understand that the loan would be based on my credit score and both our incomes- I have received conflicting information from mortgage brokers.... One says I just need to get my score to 620 and I would qualify, and another says that even though it seems I would qualify in every way if I get my score up -it does not make a difference because no lender will touch a loan if you have had a single mortgage late payment in 12 months. My home equity loan payment was late 10 times in a 14 month period. My actual mortgage was twice. The most recent of these was 1/11 on the equity line. I finally caught up in February after a year of juggling, and every line is on time since then. The only thing that was not affected by lates was my only actual cc- not one late in 20 years.

So, is it true that even if I paid all my debts except mortgage and equity that would be paid by sale of house, that a lender will still not accept me due to mortgage related lates?

My house will bring an equity of $180,000 and the house we would be buying is $510,000. I live in the LA area....

Any advice would be helpful- ThX

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Hello sugarmagnolia23, and welcome to the FICO Forums.

Generally speaking, lenders want to see a clean credit history for about 2 years, though depending on circumstances it may be shorter.  Mortgage late payments, however, are going to be much harder for an underwriter to look past.  In your case, with several late payments on two separate mortgage accounts (including one within the last 6 months), I think that approval will be difficult.  However, you are bringing a hefty down payment to the table.  That might mitigate things a bit, but I suspect that it will still be an uphill battle.

ETA: by "hefty" I'm referring to the $180,000 of equity you have in your current home, which would represent a 35% down payment on the house that you're looking at.

[sugarmagnolia23]

Thank you for your response- I am considering asking them if they would rent it to us until I could qualify- the house has been on the market over 8 months, it is an elderly couple so I think it may be possible. It is very specific kind of house and property, and the only one today that I would sell mine for. Do you think my chances would increase if I showed no debt whatsoever after selling my house, rented for 6 months, and tried the loan after 12 months of perfect history? I would have a good LTV ratio as well as a strong solid income, a large down payment, and also have $300K in my 401 K. Do they look at that also? This is so frustrating that 1 year can destroy 25 !!!!

[ShanetheMortgageMan]

I don't quite get what the new home will be used for.  Would you be buying this home to live in, or as an investment?  What will the man-you've-mets interest be in the property?  Would he also be living there?

Were the late payments on the 1st & 2nd mortgage just 30 days late?  60 days?  90 or 120 days even?  They span back from January 2011 consecutively for 10 months, or were there a few 30 day lates, caught up, then a few 30 day lates, etc.?  The exact amount of times you were late and each one's severity plays a factor into being able to qualify for a mortgage.

[sugarmagnolia23]

The house would be my primary residence, and the man I am moving with (my fiance) would be on the mortgage as well. My income is the qualifying income however.  I failed to add that he would also have about another $50,000 to add to the downpayment......and I would sell my house and use the equity. He also owns a house, but will rent it out.

Below is 1st my equity disaster- 2nd is my mortgage. There were never lates prior,  I left blanks where it was noted as on time. There has also not been one late since what you see here on any account.  

Recent payment history

										30	60	90	120	120	60		30	60	90			30
2	3	4	5	6	7	8	9	10	11	12	1	2	3	4	5	6	7	8	9	10	11	12	1
2009	2010	2011

Recent payment history

																				30	30
2	3	4	5	6	7	8	9	10	11	12	1	2	3	4	5	6	7	8	9	10	11	12	1
2009	2010	201

[ShanetheMortgageMan]

Here in Califorina the foreclosure timeline usually starts at the 90 day mark when a notice of default is filed with the county recorder, a notice of default is considered the same severity as a foreclosure, but sometimes a notice of default isn't filed until the 120 day mark (can sometime be later) and so by default a 120 day mortgage late is considered the same severity as a foreclosure when viewed by underwriting.  So from your mortgage history a new mortgage lender will consider you had a forecosure in what appears was April of 2010... and so you are now up against foreclosure guidelines, and those aren't easy.  Fannie & Freddie require 7 years, FHA is 3 years, VA is 2 years (if you or your fiance/to-be-husband are Veterans)... so it'll be awhile.  Those aren't the only mortgage programs out there, but they account for I'd say about 95% of the mortgages made today - the rest are non-conforming loan programs, meaning they don't conform to Fannie & Freddie's guidelines and are often held in the banks portfolio who makes them, specifically designed for out-of-the-box situations.  Most actually have more stringent requirements than the previous groups I've named, as they are designed to finance higher loan amounts which exceed the conforming & FHA loan limits ($729,750 here in L.A./O.C.), but I'm sure there are community banks who could probably see past the mortgage history and with a large enough down payment (probably more than 20%, more like 30-35%) and your income being able to support all of your payments, would be willing to give you an ARM of some sort.  Otherwise to qualify for the more traditional loan programs, your fiance would just have to go at it himself (you could gift him the down payment).

[sugarmagnolia23]

Wow, disconcerting to say the least. I was completely unaware that paying an equity line late while paying my mortgage on time could end in foreclosure- nor did I ever receive any notice that they ever filed for that to happen. I am not a vet- either is he. I thought it was bad that I may have to wait a year. This indicates it may be 7? I did have a broker review 2 months ago to see where I was and he is the one that said I am in line except for the 12 month wait for the mortgage lates to drop off. I will have 30% + downpayment if need be. I really don't know what to do now- I was going to put my house up for sale in hopes that by the time it sold and closed I could move forward, but am scared to do that now. If I can get my score up by paying down some debt, and I have the 30-35% downpayment, what kind of lender or broker would I approach to help me with the kind of loan you are referring to? And do you think it is possible? I would hate to have my credit run again etc if there is really not a chance.

Thank you so much for your help, I have never had difficulty like this so feel very lost.

[ShanetheMortgageMan]

Yup, a home equity loan/line of credit is still considered a mortgage since it's tied to your home.  Not sure if the mortgage broker just saw there was mortgage lates or actually paid attention to the severity, you may want to ask how they will deal with the 120 day mortgage lates and what type of loan program they had in mind for you.  

The type of financing you'd need would be non-conforming, probably will be a community bank and community banks don't work with mortgage brokers.  You just call up one by one and ask their mortgage department if they offer loan programs that will accept a 120 day mortgage late in such n such month & year - as that appears is the only issue.  If they say yes, then move on to what type of down payment, credit score, debt ratio requirement, etc. or just go over the rest of your situation top to bottom as they'll need to consider both the properties you and your fiance own, etc.  Your situation would be perfect for a sub-prime mortgage, if those still existed.  The only thing that'll be different from the program you'll eventually find and sub-prime mortgages is that you won't be charged an arm & a leg, have a pre-pay penalty, likely no balloon payment, etc.  The banks will not have recognizable names - for example a quick Google search of los angeles community banks brings up Inland Community Bank, Hanmi Bank, Broadway Federal Bank, Wilshire State Bank, FirstCity Credit Union, etc.  Most appear to have a mortgage division, some have some odd advertisement guidelines (like loan amounts up to $600k - that is not a figure that FHA, Fannie or Freddie rely on), so I'm sure they have the type of program in the right direction - whether it'd accept a recent 120 day mortgage late or not is for you to find out.  I know several of these non-conforming loan programs guidelines very well, and none of them permit mortgage lates of 90+ days late in the last 3-7 years (varies), so if you hear a lot of no's don't get discouraged because it'll likely be that way for awhile.  You may have to call a few dozen, if one says they don't have any ask if they could recommend any other banks - community banks tend to have good relationships with other community banks.

[sugarmagnolia23]

Thank you Shane. I really appreciate your time and willingness to share your expertise. I will call around as you advise. Thanks again!

[ShanetheMortgageMan]

You are welcome, and good luck.