What you Need to Know about Disputed Credit Accounts and Mortgage Home Loans in California
We often get phone calls from those wanting to know how disputed credit accounts are handled when it comes to a California FHA mortgage home loan. There are many things to understand when it comes to credit score, credit history and FHA loans. While many potential borrowers or future homeowners may understand the financial terms there are others that will likely need assistance deciphering the lingo.
You can contact us any time at 866-260-2253 to discuss any topic or question related to getting a lower monthly mortgage payment in the state of California. Whether this is your first mortgage or you are refinancing, there are plenty of options available. Here is what you need to know about disputed credit accounts with a California FHA mortgage home loan.
Disputed derogatory credit account refers to disputed charge off accounts, disputed collection accounts, and disputed accounts with late payments in the last 24 months.
If the credit report indicates that the borrower is disputing derogatory credit accounts, the borrower must provide a letter of explanation and documentation supporting the basis of the dispute.
If the disputed derogatory credit resulted from identity theft, credit card theft or unauthorized use balances, the mortgagee must obtain a copy of the police report or other documentation from the creditor to support the status of the accounts.
If the borrower has $1,000 or more collectively in disputed derogatory credit accounts, the lender must include a monthly payment in the borrower’s debt calculation.
The following items are excluded from the $1,000 cumulative balance:
disputed medical accounts; and
disputed derogatory credit resulting from identity theft, credit card theft or unauthorized use.
accounts of a non-borrowing spouse in a community property state.
If a borrower is disputing non-derogatory accounts, or is disputing accounts which are not indicated on the credit report as being disputed, the lender must analyze the effect of the disputed accounts on the borrower’s ability to repay the loan. If the dispute results in the borrower’s monthly debt payments utilized in computing the debt-to-
income (DTI) ratio being less than the amount indicated on the credit report, the borrower must provide documentation of the lower payments.
Non-derogatory disputed accounts include the following types of accounts:
- disputed accounts with zero balance;
- disputed accounts with late payments aged 24 months or greater; or
- disputed accounts that are current and paid as agreed.
For additional information see Handbook 4000.1 II.A.5.a.iii.(F); II.a.5.iv.(K)–(L) available at
http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh
If any of this is confusing reach out to us today at 866.260.2253. We have mortgage professionals available to help you get a very low mortgage rate on your home loan.