Are you worried that medical collections on your credit report might stop you from getting an FHA loan? FHA medical credit dispute guidelines could be your saving grace, especially in 2024, when homeownership is still a dream for many. In this post, we will break down everything you need to know about these guidelines, how they work, and how they can help you raise your credit score to qualify for an FHA mortgage.
Understanding FHA Medical Credit Dispute Guidelines
When trying to get a mortgage, arguments about your credit, especially over medical bills, can be a big problem. Most of the time, if you’re fighting over something on your credit report, the people lending you money might get nervous and not give you the loan.
However, there’s some good news for medical bill problems. The FHA has special rules about medical bill disputes that can help you.
With the FHA medical credit dispute guidelines, you can argue about a medical bill on your credit report without messing up your chances of getting a loan. This is important if your credit score isn’t the best and you need a little boost to qualify for an FHA loan. Basically, it’s like the FHA is saying, “It’s okay, we understand disputes over medical bills happen,” and they won’t hold it against you when you’re trying to buy a house. Click here to apply for FHA loans
Why Are Credit Disputes a Problem During the Mortgage Process?
Before we dive deeper into the FHA medical credit dispute guidelines, it’s essential to understand why credit disputes can be problematic when applying for a mortgage. Here’s why:
When you dispute a negative item on your credit report, such as a collection, the credit bureaus often temporarily remove the negative impact of that item from your credit score calculation. This can artificially inflate your credit score. Lenders know this, so they usually require that all disputes be resolved before they proceed with the loan. They need to see your true credit score without any adjustments.
Let’s consider an example:
- Suppose you have a $500 medical collection on your credit report.
- This collection could drop your credit score by 50 points, taking you from a 620 to a 570.
- If you dispute this collection, the credit bureaus might temporarily ignore it, raising your score to 620.
- However, once the dispute is resolved and the collection is validated, that 50-point drop could return, potentially disqualifying you from the loan.
This is why lenders usually require disputes to be removed before closing. However, the FHA has specific guidelines that allow medical disputes to remain without requiring them to be resolved.
The Advantage of FHA Medical Credit Dispute Guidelines
The FHA medical credit dispute guidelines offer a significant advantage. Medical disputes do not need to be resolved like credit disputes before your FHA loan can close. The FHA acknowledges that medical debt is different from other types of debt. Medical debt often arises unexpectedly, and disputing it is common due to errors in billing or insurance issues.
Here are the key points about these guidelines:
- Medical Collections Exemption: Medical collections currently in dispute are exempt from the FHA’s credit dispute rule. This means they won’t block your loan approval.
- Non-Medical Collections Under $1,000: If you have non-medical disputes with a total balance of less than $1,000, these are exempt from the requirement to remove disputes.
- Zero Balance Collections: Any collections with a zero balance need not be resolved, regardless of whether they are medical or non-medical.
How FHA Medical Credit Dispute Guidelines Can Raise Your Credit Score
Now that you know the FHA guidelines, let’s talk about how they can help you qualify for a loan by raising your credit score.
When you have medical debt, it’s common to dispute it due to billing errors, insurance miscommunication, or other reasons. If you’ve done this, the FHA medical credit dispute guidelines will allow you to keep these disputes active while applying for a mortgage.
Keeping the dispute active can temporarily boost your credit score by ignoring the negative impact of the collection. This can be the difference between qualifying for a loan or not. Click here to apply for FHA loans with low credit score
Here’s how it works in practice:
- Dispute Medical Collections: If you have medical collections on your credit report, disputing them can improve your score without risking your FHA loan approval.
- Rapid Rescore: In some cases, a rapid rescore can be used to update your credit report quickly after disputing medical collections. This lets you see the impact on your score immediately, which can be crucial if you’re trying to meet a deadline for mortgage approval.
- Credit Score Increase: Using the FHA medical credit dispute guidelines, borrowers have seen their credit scores rise enough to qualify for a better mortgage rate or meet the minimum score requirement.
How One Borrower Benefited from FHA Medical Credit Dispute Guidelines
Let’s look at a real-world example that shows how these guidelines can work in your favor. Blake Clements (not his real name) came to us at Gustan Cho Associates after another lender denied him an FHA loan. His problem? Disputed accounts on his credit report.
Here’s what happened:
- Initial Credit Score: Blake started with a 622 credit score but had multiple disputes, including non-medical accounts totaling over $1,000.
- Lender Denial: The first lender he approached required him to remove all disputes to proceed with the loan. After he did, his score dropped to 577—just below the 580 needed for an FHA loan with a 3.5% down payment.
- Finding a Solution: When Blake came to us, we reviewed his situation and identified two medical collections he had removed from the dispute. We advised him to re-dispute these accounts because the FHA medical credit dispute guidelines would allow them to remain active.
- Rapid Rescore: We performed a rapid rescore, and within 48 hours, his credit score jumped back to 584—high enough to qualify for the loan.
Blake got his FHA loan with a 3.5% down payment thanks to the FHA medical credit dispute guidelines. We closed his loan within three weeks without extending his contract date.
FHA Medical Credit Dispute Guidelines in 2024: What You Need to Know
As we move into 2024, staying updated on any changes in the FHA medical credit dispute guidelines is important. While the core rules for medical credit disputes remain the same, working with a lender who understands these guidelines inside and out is always wise. With housing markets still competitive, every point on your credit score counts.
Here’s what you need to know going into 2024:
- Updated Credit Score Requirements: While the minimum FHA credit score requirement remains 580 for most borrowers, having a higher score can get you better rates. Utilizing the FHA medical credit dispute guidelines can help you achieve this.
- Lender Overlays Still Apply: Even though FHA guidelines allow for medical disputes, some lenders impose stricter rules, known as overlays. These overlays may require you to remove all disputes, including medical ones. Choosing a lender like Gustan Cho Associates, which has no overlays, can help you avoid this issue.
- The Importance of Timing: Timing is everything in the mortgage process. Understanding when and how to use the FHA medical credit dispute guidelines can make the difference between getting approved or denied. Working with a knowledgeable lender ensures you make the right moves at the right time.
How to Get Started with FHA Medical Credit Dispute Guidelines
If FHA medical credit dispute guidelines could help you qualify for a mortgage, the first step is to talk to a lender who understands these rules. At Gustan Cho Associates, we specialize in helping borrowers who other lenders have denied due to credit issues.
Our expertise in FHA loans and our lack of lender overlays means we can offer solutions that other lenders can’t.
Don’t let medical debt hold you back from achieving your dream of homeownership. By leveraging the FHA medical credit dispute guidelines, you can raise your credit score and move closer to getting approved for a loan.
Conclusion: The Smart Way to Use FHA Medical Credit Dispute Guidelines
In 2024, homeownership is still within reach, even if you have medical collections on your credit report. The FHA medical credit dispute guidelines offer a unique opportunity to raise your credit score and qualify for a loan that might otherwise be out of reach. You can confidently navigate the mortgage process by understanding these guidelines and working with the right lender.
Whether you’re looking to buy your first home or refinance your current one, don’t let credit disputes stand in your way. Contact us at Gustan Cho Associates to learn how we can help you utilize these guidelines to your advantage. With our expertise, we can turn your credit challenges into opportunities, helping you achieve your goal of homeownership. Click here to apply for FHA loans
FAQs: Simple FHA Medical Credit Dispute Guidelines You Must Know
- 1. What are FHA medical credit dispute guidelines? FHA medical credit dispute guidelines are special rules that allow you to dispute medical collections on your credit report without stopping you from getting an FHA loan.
- 2. Can I still get an FHA loan if I have medical collections? According to FHA medical credit dispute guidelines, you can have active medical disputes and still qualify for an FHA loan.
- 3. Why do lenders care about credit disputes during the mortgage process? Lenders usually care because disputes can temporarily raise your credit score. However, FHA medical credit dispute guidelines make exceptions for medical disputes.
- 4. How do FHA medical credit dispute guidelines help raise my credit score? By disputing medical collections, your credit score might improve because the negative impact is temporarily removed, which can help you qualify for an FHA loan.
- 5. Are there any other types of disputes allowed under FHA guidelines? Yes, disputes on non-medical collections under $1,000 or with zero balance are also allowed under FHA medical credit dispute guidelines.
- 6. What happens if my lender requires all disputes to be removed? Some lenders have stricter rules called overlays. If they require all disputes to be removed, including medical ones, you should find a lender that follows FHA medical credit dispute guidelines.
- 7. How quickly can my credit score go up after disputing medical collections? Using a rapid rescore, your credit score could improve within 48 hours after disputing medical collections under FHA medical credit dispute guidelines.
- 8. What should I do if my FHA loan application is denied because of disputes? If denied due to disputes, check if they are medical collections. FHA medical credit dispute guidelines might help you keep those disputes active and reapply.
- 9. Is it common for people to use FHA medical credit dispute guidelines? Many borrowers use FHA medical credit dispute guidelines to boost their credit scores and qualify for an FHA loan.
- 10. How do I get started with FHA medical credit dispute guidelines? Contact a lender who understands FHA medical credit dispute guidelines. They can guide you through the process and help you qualify for a mortgage despite medical collections.
If you have any questions about FHA Medical Credit Dispute Guidelines, please contact us at 800-900-8569. Text us for a faster response. Or email us at alex@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.
This blog about the waiting period after foreclosure requirements for borrowers on title but not on mortgage was updated on August 15th, 2024.
