Home buyers seeking to obtain a FHA insured loan are facing an additional challenge regarding credit disputes that they may have. As of April 1 borrowers with a credit dispute totaling more than $1,000 will not be able to get a FHA insured mortgage.
If such a credit dispute exists the borrower must now pay off the outstanding balance, or document to the lender that a payment arrangement has been made to satisfy the debt. Payment plans must be documented and the payments will figure into the borrowers’s debt to income ratio. Previous to this new rule the mortgage underwriter could determine if such credit debt could impact the approval of the borrower’s loan.
The FHA is mandating this new regulation in order to protect it’s reserve fund established to cover losses from mortgage defaults. This announcement comes on the heels of the increase of FHA mortgage insurance premiums which took place this month as well.
FHA loans are popular with buyers who do not have sufficient down payment funds to qualify for a conventional loan. A FHA loan down payments can be as little as 3.5%. FHA mortgages are also important to buyers with less than perfect credit. Lenders will consider a buyer with FICO credit scores as low as 640.
Wallingford Real Estate – Wallingford, PA 19086
