FHA Disputed Accounts

FHA Disputed Accounts - If the credit report reveals that the borrower is disputing any credit accounts or public records, the disputes must be resolved. FHA will not allow you to close on a loan with disputed accounts unless the disputed account has a zero balance; is marked as "paid in full" or "resolved"; or has both a balance less than $500.00 and the date of the dispute is more than 24 months old.

To get disputed accounts resolved and updated on your credit report go to www.annualcreditreport.com. Create a file for each credit bureau Equifax, Trans Union and Experian. When you create your file write down your file number and write down the phone number for the credit bureau.

Call each credit bureau and tell them you are no longer disputing any accounts on your credit report. Your credit report will be updated within 30 days.

FHA Collection Accounts

FHA does not require that collection accounts be paid off as a condition of mortgage approval. Medical collection accounts, auto repossessions, credit card collection account and any other collection account does not have to be paid off.

However, court-ordered judgments must be paid off before the mortgage loan is eligible for FHA insurance endorsement.

An exception to the payoff of a court-ordered judgment may be made if the borrower has an agreement with the creditor to make regular and timely payments and can provide documentation indicating that payments have been made according to the agreement.

Collection accounts trigger neither an explanation requirement nor a hypothetical monthly payment to be used in qualifying borrowers. The presence of collection accounts in the borrower’s credit history already result in lowering the credit bureau scores used in the approval process and, thus, no further information or action need be provided by the borrower.

On January 20, 2010 FHA announced a new policy to address risk. FHA changed the minimum credit score for new borrowers.

FHA requirements new borrowers will now be required to have a minimum score of 580 to qualify for 3.5% down payment
Borrowers with less than a 580 credit score will be required to put down at least 10%
Minimum 500 credit score