Late mortgage payments can have an impact on your ability to get a loan. However, lenders like Fannie Mae, Freddie Mac, and HUD are not too concerned about a single late payment. However, homeowners should be very careful not to have multiple late payments or rolling-late payments on their rent or home loan payments.
Late on rent or mortgage payments? Know the rules.
Late payments on mortgages or rent can be a significant hurdle for borrowers. Fannie Mae, Freddie Mac, and HUD all have strict guidelines when it comes to late payments; especially payments for rent and mortgages.
Conventional loans: allow one 30-day late payment in the past 12 months for rate and term refinance or home purchase.
Conventional loans: no cash-out refinance mortgage on conventional loans with a 30-day late payment.
FHA loans: allow up to two 30-day late mortgage payments in the past 12 or 24 months.
FHA loans: any exceptions depend on credit score and cash reserves available after closing costs.
FHA loans: a larger down payment may help to bypass recent late payments in the past 12 months.
VA loans: must have timely payments in the past 12 months.
VA loans: allows one 30-day late payment in the past 12 months downgrade-able to manual underwrite.
To underwrite late payments on FHA and VA loans, you must have a documented excuse such as a loss of employment or a major illness that required hospitalization.
If you have rolling 30-day late payments, it means you're late on one payment, and the next payment is already due.
When are mortgage payments typically due?
Mortgage payments are typically due on the first day of the month.
Some mortgage lenders may allow a grace period of up to 15 days for the borrower to make the payment without penalty.
After the grace period ends, the payment is considered past due.
A mortgage payment is considered past due if it is not received by the end of the grace period, which is typically the 16th day of the month. The lender may charge a late fee if the payment is received after the due date or grace period.
It is recommended that borrowers communicate with their lenders as soon as possible if they are unable to make a payment to discuss their options and avoid defaulting on the loan.
Once a mortgage payment is late, the lender will typically charge a late fee, which is usually a percentage of the amount due.
The exact amount of the late fee and the grace period before it is assessed may vary depending on the terms of the mortgage agreement and the lender's policies.
If the borrower continues to miss payments, the lender may start the foreclosure process.
Foreclosure is the legal process by which a lender takes possession of a property when the borrower fails to make mortgage payments as agreed.
Depending on the state, the foreclosure process may take several months or even years to complete.
The borrower may have the opportunity to catch up on missed payments and bring the loan current. However, if the borrower is unable to do so, the lender may eventually take possession of the property and sell it to recover the remaining balance on the mortgage.
This can have serious consequences for the borrower, including damage to their credit score and potential legal and financial penalties.
If a borrower becomes late on their mortgage payments, they may be at risk of foreclosure.
However, there are several options available to help them avoid this outcome:
Contact the lender: The borrower should contact their lender as soon as possible to explain their situation and discuss their options. Some lenders may offer temporary solutions, such as forbearance or loan modification, to help the borrower catch up on their payments.
Refinance: If the borrower has enough equity in their home, they may be able to refinance their mortgage and lower their monthly payments.
Sell the home: If the borrower can no longer afford their mortgage payments, they may want to consider selling their home. This can help them avoid foreclosure and may also allow them to pay off their mortgage and other debts.
Seek financial counseling: The borrower may benefit from seeking help from a financial counselor who can help them develop a budget and a plan to manage their debt.
By taking the appropriate steps, they may be able to avoid foreclosure and keep their home.
Still have questions about late payments or qualifying for a new home loan?
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