Credit disputes over $1K? FHA won’t back a loan

You really really really need to have your clients pull their own credit reports before going mortgage shopping. (It’s free once a year from AnnualCreditReport.com — and that’s the only government-authorized source.)

Save a headache: Have your clients do their homework first.

That’s because, starting April 1, FHA won’t back a mortgage if a borrowers has credit disputes totaling more than $1,000. And if FHA won’t back it, good luck getting a bank to issue it.

There are a couple of caveats. If the dispute is more than two years old it won’t count. And a borrower can pay off the disputed amount (or set up a payment plan) — just be prepared to show documentation. And yes, any payment arrangement will then be considered as part of the debt-to-income ratio.

So consider advising your clients to pull their reports — not just a FICO score! — and if there are any disputes get them cleared up, especially if they total more than a grand. (Once again: AnnualCreditReport.com is the place to go.)

About Andrew Kantor

Andrew is VAR's editor and information manager, and -- lessee now -- a former reporter for the Roanoke Times, former technology columnist for USA Today, and a former magazine editor for a bunch of places. He hails from New York with stops in Connecticut, New Jersey, Cincinnati, Columbus, and Roanoke.
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