Credit Disputes Affect Mortgage Approval

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Credit Disputes Affect Mortgage Approval

Credit Disputes Affect Mortgage Approval: What Is It?

If you are wondering how Credit Disputes Affect Mortgage Approval then this is the article for you as we will be going over these items in detail and primarily how they affect FHA Loans and Conventional Loans.  Credit disputes are items on your credit that can get your loan file stalled rather quickly and put on the sidelines.  As with usual mortgage regulations, FHA Loans have a lot more leniency when it comes to credit disputes than their conventional loan counterparts.  Needless to say in both case Credit Disputes Affect Mortgage Approval.  What is a credit dispute?  A credit dispute is when a consumer will dispute a derogatory items on their credit report because they feel it is inaccurate or in error.  Once the dispute is carried out, it is put on the derogatory item upon pending a further investigation.  The investigation time is 30 days and within those 30 days the creditor needs to provide documentation that supports their reporting of the item.  If nothing is received in 30 days, the item is removed from the credit report.  The most common derogatory items that are disputed are collection accounts, charge off accounts, and late payments.  Once the credit dispute is put on the item, the derogatory affect on the credit score is removed and it acts like a band-aid until the investigation on the item is completed.  However, if this dispute is proved to be false or removed, the derogatory affect comes back to your credit score, thus dropping your FICO.

Credit Disputes Affect Mortgage Approval: What’s The Big Deal?

There are definite reasons why Credit Disputes Affect Mortgage Approval and there is a reason mortgage lenders treat them so seriously when looking at your mortgage application.

–          In most circumstances any open credit disputes will put an immediate halt to the progress of the mortgage.

–          As mentioned earlier, credit tradelines in dispute are not used in the calculation of the credit scores so it is as if the tradeline doesn’t exist as long as the dispute is active.

–          Since the disputed tradelines are not calculated into the credit score, the  credit scores are artificially inflated and not reflective of the true score.

Credit Disputes Affect Mortgage Approval: FHA Guidelines

Looking into how Credit Disputes Affect Mortgage Approval we will first look into the guidelines of the FHA.

–          FHA allows for credit disputes to be on medical collections, this is due to the fact that medical collections will not disallow your FHA Loan

–          FHA prohibits credit disputes to be on charge off accounts

–          If you have a zero-balance non-medical tradeline with a credit dispute, FHA allows this

–          If all non-medical tradeline disputes total less than $1,000 this is allowed

Credit Disputes Affect Mortgage Approval: Conventional Guidelines

If you are wondering how Credit Disputes Affect Mortgage Approval for Conventional Loans, you need to know that Desktop Underwriter or DU requires that there be no open and active tradelines with credit disputes on them.  If your credit report is in error, then yes you can proceed with disputes and provide the evidence as to why the item in question is an error.  A clean credit report must be supplied for DU, free of credit disputes or you will not get an Approve/Eligible.

If you are interested in going over your credit report and history in preparation for your upcoming home purchase and mortgage, we can go over how Credit Disputes Affect Mortgage Approval.  Please reach out to me any time at 888-900-1020, by email at contact@loanconsultants.org, or by applying directly at www.loanconsultants.org.  I am available 7 days a week, nights, weekends, and holidays in order to serve you the customer.  I look forward to working with you.

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