1. Mortgage Guidelines On Credit Disputes During Underwriting Process
* FHA Guidelines On Credit Disputes Explained * There are strict Mortgage Guidelines On Credit Disputes mortgage borrowers.
- Credit Disputes is often used by credit repair companies - Consumers going through credit repair often use the credit dispute technique to delete negative tradelines
* When a consumer wants to remove a derogatory credit item off their credit report whether due to the inaccuracy and/or just to take a chance on having it removed here is the process:
- they will do a credit dispute by writing a letter to the credit bureaus - the letter states the inaccuracy or validity of the negative credit reporting item - By federal law, the credit bureaus need to investigate the credit dispute - has 30 days to do its investigation - if the creditor does not validate the credit dispute, then the credit bureaus need to remove the derogatory item in question off the consumer’s credit report - If the creditor validates and confirms the negative credit reported item, then the derogatory credit item will remain on the consumer’s credit report - Disputing derogatory credit items is done by many consumers trying to repair their credit - However, disputes during the mortgage process need to be avoided - This because it will backfire on the mortgage borrower
2. Impact In Retracting Credit Disputes
* One of the negative impacts of retracting credit disputes is that the consumer’s credit scores will drop.
- Borrowers who barely meet the minimum FHA Credit Score Requirements run a risk of not being able to qualify for FHA Loan - This is the case if their credit scores drop below the minimum credit score requirements after retracting the credit disputes - To qualify for a 3.5% down payment FHA mortgage loan, one needs a 580 credit score
* Here is a case scenario:
- if loan originator qualifies a borrower with a 580 credit-score - overlooked the credit disputes on the borrower’s credit report - the mortgage underwriter will catch this - will place the mortgage application on suspense until the credit disputes have been removed
Once the credit disputes are retracted and are reflected on the borrower’s credit report, the credit scores can drop below the 580 minimum credit scores required to qualify for an FHA Loan.
