-
Credit Disputes During Mortgage Process
HUD, the parent of FHA, does not allow credit disputes on the following:
1. Outstanding collection accounts that are not medical collections.
2. Charged off accounts
3. Late Payments in the past 24 months
4. Derogatory public records such as bankruptcy, foreclosure, deed-in-lieu of foreclosure, short sale, child support, federal and state tax liens, judgments, delinquent student loans, and other derogatory credit tradelines.
EXEMPT FROM CREDIT DISPUTES
1. Medical collections
2. Non-medical credit disputes that are on-time payments and good standings.
3. Non-medical disputes with zero balance.
4. Non-medical credit disputes with total credit tradelines with under $1,000 Outstanding Balance.
5. Collections and charge off accounts, late payments, older than 24 months.
VA, USDA, NON-QM, FANNIE MAE and FREDDIE MAC are normally EXEMPT from credit disputes. We have a YouTube live video aired today September 25th, 2023 at 10 am hosted from GCA Mortgage Group which we will post on this thread. Contact Gustan Cho Associates if you have any questions.
-
5 Replies
-
Qualifying for a mortgage with credit disputes on your credit report can be challenging, but it’s not impossible. Here are some factors to consider:
-
Severity and Resolution of Disputes: Lenders will consider the nature and resolution of the credit disputes. If you have legitimate disputes that have been resolved and resulted in accurate updates to your credit report, it may be less of an issue than unresolved disputes or disputes related to significant derogatory information.
-
Credit Score: Your credit score plays a crucial role in mortgage qualification. The impact of disputes on your credit score will depend on their nature. Disputes that remove negative, inaccurate information may actually improve your score, while disputes related to legitimate negative items may not help as much.
-
Lender Policies: Different lenders have varying policies regarding credit disputes. Some may be more lenient, while others may have stricter requirements. It’s essential to research and potentially consult with multiple lenders to find one that’s willing to work with your specific situation.
-
Documentation: Be prepared to provide documentation regarding the disputes and their resolutions. This can include letters from creditors indicating that the disputes have been resolved, as well as updated credit reports showing the corrected information.
-
Credit History and Profile: Lenders consider your overall credit history and profile, not just the presence of disputes. If you have a strong credit history in other areas and can demonstrate responsible financial behavior, it may mitigate the impact of disputes.
-
Down Payment and Income: Your ability to make a significant down payment and your income stability are also critical factors in mortgage approval. A larger down payment and a stable income can compensate for credit issues.
-
Interest Rate: Even if you qualify for a mortgage with credit disputes, be prepared for the possibility of higher interest rates. Lenders may charge higher rates to borrowers with lower credit scores or credit history issues.
-
Credit Counseling: If your credit disputes are related to financial difficulties, you might consider seeking credit counseling or working with a credit repair service to improve your credit profile before applying for a mortgage.
Ultimately, it’s essential to work closely with a mortgage professional who can assess your specific situation and guide you through the application process. They can provide insights into how your credit disputes may impact your ability to qualify for a mortgage and help you explore potential solutions or strategies to improve your chances of approval.
-
-
Mortgage rules and regulations are so complicated. So many things don’t make sense. Great video about credit disputes.
-
Correct. Mortgage industry is very ambiguous and not every lender has the same guidelines on government and conventional loans. Most lenders have higher credit requirements which are called overlays. Many lenders want credit disputes removed including exempt disputes.
-
This is one reason it is so important for a client’s credit restoration service to work closely with the lender. In most all cases, before the final credit pull, we will make sure that all disputes are closed out and that the credit bureaus have been informed that the disputes are closed. This process can take up to 72 hours, but generally happens within 24. We like to run as many disputes as possible in our time frame, so we make sure that closing them out is part of the process. We have seen many times where a new client will still show in dispute although they have not disputed in over a year.
