VA Credit Dispute Guidelines During Mortgage Process On VA Loans

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This BLOG On VA Credit Dispute Guidelines During Mortgage Process On VA Loans Was PUBLISHED On March 23rd, 2019

VA Credit Dispute Guidelines During Mortgage Process On VA Loans

VA Loans is hands down the best mortgage loan program in the U.S.

  • However, not everyone can qualify for VA Home Loans
  • Only active and/or retired members of the U.S. Armed Forces with a certificate of eligibility (COE) can only qualify for VA Loans
  • VA has one of the most lenient mortgage guidelines than any other government and/or conventional loan programs
  • VA has the most lenient waiting period after bankruptcy and housing event
  • There is a two year waiting period after bankruptcy and/or foreclosure, deed in lieu, short sale
  • VA does not have a minimum credit score requirement nor a maximum debt to income ratio cap

Gustan Cho Associates at Loan Cabin Inc. is a direct lender with no overlays on VA Loans. In this blog, we will discuss VA Credit Dispute Mortgage Guidelines During The Mortgage Process.

VA Credit Dispute During Mortgage Process

What is the VA Credit Dispute During Mortgage Process

Per VA Credit Dispute Mortgage Guidelines, credit disputes are not allowed during the mortgage process.

  • Any non-medical VA credit dispute needs to be removed in order for the mortgage process to proceed
  • Medical collections are exempt from VA Credit Dispute Retraction Guidelines
  • Per VA Credit Dispute Lending Guidelines, there cannot be any non-medical credit disputes
  • If there is, the account goes into suspense until credit disputes are removed
  • Zero balance non-medical collection accounts are exempt
  • So are medical collections
  • Any non-medical collection accounts with a total aggregate outstanding balance of under $1,000 are exempt from removing the disputes

Loan officers should not issue pre-approval letters with any borrower with outstanding credit disputes.

Reasoning Why Credit Disputes Are Not Allowed By Lenders

Reasoning Why Credit Disputes Are Not Allowed By Lenders

The reason, why VA requires borrowers to remove credit disputes, is because credit scores with credit disputes are inaccurate.

  • Whenever someone disputes a derogatory trade line, the credit reporting agencies automatically discount the negative item from the credit scoring formula
  • This is why credit scores automatically increase when consumers dispute a negative credit trade line
  • When consumers remove credit disputes, the scores goes back down
  • A loan office should never issue a pre-approval letter with outstanding disputes

The automated underwriting system findings may be inaccurate with outstanding credit disputes.

Exempt Credit Disputes

Exempt Credit Disputes

Charge off accounts, outstanding collections, late payments, judgments, tax-liens, are not allowed to have credit disputes. The following credit disputes do not have to be removed:

  • Outstanding collections that total less than $1,000 or less do not be retracted
  • Medical collections
  • Accounts associated with identity theft as long as the borrower can provide a police report or documentation by the creditor pertaining to being a victim of identity theft

The borrower’s ability to repay the mortgage is a major factor analyzed by mortgage underwriters. This is why an accurate credit score is important along with the borrower’s overall past payment history.

How To Remove Credit Disputes

How To Remove Credit Disputes

Borrowers can try to remove credit disputes directly by clicking this link: HOW TO REMOVE CREDIT DISPUTES

Here are the general steps in removing credit disputes:

  • Go over the accuracy of credit tradelines
  • Retract the disputed credit tradelines by notifying the credit bureaus

Here are the phone numbers to the three major credit bureaus:

  • TransUnion Dispute Department: (800) 916-8800
  • Experian Dispute Department: (800) 493-1058
  • Equifax Dispute Department: (800) 203-7843
  • The borrower needs to contact the creditor they are disputing and request retraction of disputes
  • Or if they do not cooperate, need to write a letter to the credit bureaus to retract the credit disputes

Here is a sample letter to retract the credit dispute:

CONSUMER NAME

DATE STREET

ADDRESS

CITY, STATE ZIP

To whom it may concern,

I (CONSUMERS NAME) currently do not dispute the following accounts either as reported on my credit report or directly with the creditors. I have contacted the creditors directly and closed any disputes or confirmed that there are no open disputes at this time. I am requesting that Equifax, Trans Union and Experian remove the dispute comments from the following accounts.

Thank you,

PRINTNAME

SIGNATURE

Step 3: send the letter to the credit bureau to remove dispute to your Loan Originator so that they can send it into the national credit reporting agency.

Please contact Gustan Cho Associates for more information on retracting credit disputes during the mortgage process and qualifying for a mortgage with a direct lender with no overlays at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com.

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