Top credit report move that will wreck your mortgage approval

Top credit report move that will wreck your mortgage approval

Getting a mortgage loan these days is overly complicated, and annoyingly paperwork intensive. This is simply a response to the market collapse that started a few years ago, when it seemed like everyone could get a loan.

If your credit report isn’t perfect, a super common “trick” that credit repair companies and consumers try is to dispute credit accounts.

While disputing incorrect credit accounts is OK, it IS NOT OK right before applying for a mortgage

Disputing a charge, balance, payment history, or any aspect of the credit obligation places the account in the dispute status. This adds  “in dispute” to your actual credit report until the dispute is resolved.

So Why Is This A Problem?

The powers that be who make underwriting guidelines (Fannie Mae, Freddie Mac, FHA, VA, etc) have decided that whenever an account is in dispute, your credit report no longer provides a 100% accurate picture of the persons credit history.  Therefore all the computerized systems used to underwrite the initial aspect of your file ignores accounts in dispute, and your file either becomes automatically rejected, or is switched to what is known as a manual underwrite.

Manual underwriting dramatically changes maximum debt ratios, program guidelines, and the level of documentation needed. Manual underwriting could easily take a file that should be approved, and turn it into a denial.

The solution:

If you are thinking of buying a home and have credit challenges, you need to work on credit repair when you start thinking of buying a home, not once a loan officer says you have issues. Everyone has an idea of where their credit sits. Act early.

Next, don’t dispute anything or everything on your credit report. If an account is negative, but accurate, disputing is a waste of time.  I’ve seen people try disputing their bankruptcy!  Really??

Finally, you can talk to the credit bureau to remove the dispute item comments from your credit report in most cases.  It may take some time, so again, plan ahead. Do it before you’ve fallen in love with your dream house!



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