Lenders vary in strictness and some may not allow any late mortgage payments, while others will allow 1 or 2 in the last two years if there is a good explanation. Other items on the credit report can also indicate a borrower's attitude toward credit obligations. Credit reports indicate the outstanding balance, current balance and terms of payment on the borrower's revolving and installment debt. Underwriters review these credit obligations to determine the borrower's patterns of credit use and repayment behavior. Revolving credit encompasses department store and bank credit cards.
Installment credit encompasses longer term credit with structured payment plans, such as car loans.
Generally, underwriters are not concerned over isolated and minor slow payments indicated on the credit report. Though these items may indicate past credit problems, they sometimes have valid explanations. Underwriters may require a letter of explanation on items noted in the public records. Many times consumers have re-established credit and have an excellent payment history on their current obligations. They will review the appraisal to assure that it meets the requirements of the investor and sometimes request additional information to substantiate the value.