Mortgage Approval Without Retracting Credit Disputes

This Article Is About Mortgage Approval Without Retracting Credit Disputes 

Mortgage Approval Without Retracting Credit Disputes is possible but under certain circumstances. On this blog, we will show our viewers how to get Mortgage Approval Without Retracting Credit Disputes.

More and more people are disputing their credit today.

  • Consumers with bad credit or derogatory credit tradelines hire credit repair companies to clean their credit. By doing so multiple disputes show up
  • Others are disputing derogatory credit themselves in hopes of getting the derogatory tradelines deleted or corrected
  • What a dispute on your credit does is hide the negative reporting of that tradeline which falsely improves your credit score immediately
  • For example, if a consumer disputes a recent 30-day late payment, all credit bureaus automatically negate the derogatory tradeline from its credit scoring formula
  • The credit dispute triggers the scoring model like it does not exist
  • Due to this, consumer credit scores automatically increases when a credit dispute is posted
  • On the flip side, when consumers retract disputes, the credit scoring model triggers that derogatory item back to the credit scoring model
  • This triggers a recent negative tradeline and results in credit scores dropping

Credit Disputes Halts Mortgage ProcessMortgage Approval Without Retracting Credit Disputes

Disputing accounts can help you in removing negative credit:

  • However, disputes can hinder the underwriting process if the dispute is not removed
  • Mortgage Underwriters will make borrowers remove disputes on any account that is derogatory in the last 24 months on a cumulative balance of over $1,000
  • So if the borrower has a credit card with a $500 balance disputed and another credit card with $700 balance disputed the mortgage underwriter will HALT the mortgage process until the disputes are retracted
  • By retracting the dispute, it will immediately drop borrowers score
  • It may possibly prevent borrowers from getting an approve/eligible on automated underwriting system

If you give us a call we can help you maximize your score by keeping disputes on enhancing your score without the underwriter making you remove them.

Mortgage Guidelines On Credit Disputes

There are circumstances where borrowers can get mortgage approval without retracting credit disputes.

Here are general credit dispute mortgage guidelines:

  • Medical credit disputes are exempt
  • Non-medical collections with zero outstanding balance are exempt from retracting disputes
  • Non-medical disputes with an aggregate total of $1,000 in outstanding balance are exempt from retracting disputes
  • Cannot have credit disputes on derogatory credit tradelines such as late payments and charged off accounts

There are ways of getting mortgage approval without retracting credit disputes which we will discuss in the following paragraphs.

Mortgage Approval Without Retracting Credit Disputes And How We Can Help

How can we help approving the mortgage without reversing credit disputes

Lets take a case scenario where a consumer is disputing a credit card account with a recent 30 day late payment. The credit card limit is $3,000 and the outstanding balance is $2,000. The recent 30 day late payment plummeted consumer credit scores by 80 points where the consumer’s credit scores is now 500. By disputing the derogatory tradeline, the consumer credit scores will go back up to 580 because the credit bureaus will negate the late payment while the consumer is disputing it. FHA requires a minimum credit score of 580 to qualify for 3.5% down payment home purchase. Mortgage Underwriter WILL require that the credit dispute be retracted in order for mortgage process to proceed. However, if borrower retracts credit dispute, credit scores will drop back to 500 FICO credit scores.

Here is the solution:

  • Mortgage Approval Without Retracting Credit Disputes is allowed if the outstanding collection balance is under $1,000 from all creditors
  • The $2,000 outstanding collection account balance needs to be paid down to under $1,000
  • If the late payment credit card outstanding balance is paid down under $1,000, borrower DOES NOT need to retract credit dispute
  • Any credit disputes on non-medical collections with zero balance are exempt from credit disputes
  • Zero balance derogatory credit tradelines do not have to be removed during the mortgage process

Credit disputes that are older than 24 months from the date of last activity (DLA) are exempt from credit disputes. Older credit disputes on outstanding collection accounts and/or derogatory credit tradelines that are over two years old do not have to be removed.

Mortgage Approval Without Retracting Credit Disputes Is Paying Down Balance Under $1,000

What borrowers need to do is pay down all accounts that are late in the last 24 months down to a total balance of $999.

  • Then you can maximize the score and prevent the disputes to be removed
  • Consumers also could do the same in reverse
  • Let’s say you have a credit card with a balance of $600 that is late in the last 12 months dropping your score down to 570
  • Dispute this account and watch your score go up to a 600
  • Now you may receive and approve eligible and only have to put 3.5% down payment vs keeping the 570 scores and being downgraded to manual underwrite and requiring you to have to put 10% down and fit into the manual underwriting guidelines which are more stringent

Manual Underwriting Guidelines

How to qualify for a mortgage with a lender without lender overlays

VA and FHA Loans allow manual underwriting. Another option borrowers with credit disputes have is to leave credit disputes alone and get it downgraded to a manual underwrite. However, the Manual Underwriting Guidelines need to be met. Some manual underwriting requirements include timely payments in the past 12 months, one month’s reserves (P.I.T.I.), and verification of rent.

Another option when have disputes on accounts with greater than $1,000 cumulative is to accept that the file will be a manual underwrite.

  • A manual underwrite is a bit more stringent
  • Normal FHA debt-to-income ratio allows for a 46.9% front end 56.9% back end DTI
  • Manual underwrite has 3 tiers of back end ratios
  • A 50 debt-to-income ratio is the ratio manual underwrite one

This  requires the client to have 2 of the following compensating factors:

  • 3 months of total payment in the bank after you close, meaning after you pay for the down payment and closing cost
  • no payment shock from current housing payment via rent or current mortgage payment ( over 5% increase is considered payment shock)
  • residual income
  • This is for your Mortgage Banker to figure out

Basically it means you have money to pay all other debts not considered like cell phone, electric, food, gas, etc, etc.  Manual underwriting also does not allow for any late payments in the last 12 months, even if disputed.  Manual Underwriting also requires verification of rent. If you fit these parameters then disputes can be left on.

In closing do not look at your credit and see a 500 score then higher a credit repair company to dispute your negative tradelines and then see your score jump to a 640 and think you are ready.  The above rules should help guide you through this misconception.

Qualifying For A Mortgage With A Lender With No Lender Overlays

Borrowers with credit disputes and marginal credit scores who need to qualify for a mortgage, please contact us at Gustan Cho Associates Mortgage Group. We are a national mortgage company with no overlays on government and conventional loans licensed in multiple states. Over 75% of our borrowers are folks who could not qualify at other lenders due to those lenders having overlays. We are available 7 days a week, evenings, weekends, and holidays. Call or text us for faster response at GCA Mortgage Group 262-716-8151 or text us for a faster response. Or email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

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