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Buyers with Credit Disputes May be Ineligible for FHA Loans

As of  April 1, the FHA is no longer insuring mortgages to borrowers who have an ongoing credit dispute of $1,000 or more on their file, as part of a new rule. This means that to be considered for an FHA-backed loan, borrowers will have to either pay the remaining balance on the credit dispute or enter in to a payment plan, which will be documented and submitted to the FHA, who will then figure it in to the debt-to-income ratio for the new mortgage. Some feel that this will “kick some buyers out” of the marketplace, and keep more potential home buyers from securing a mortgage.

The FHA said the rule was designed as another protection for the FHA emergency fund, which has fallen below the required amount mandated by Congress.

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