VA Credit Dispute Guidelines On VA Mortgage Loans

This Article Is About The VA Credit Dispute Guidelines On VA Mortgage Loans

VA Loans are the best loan program in the U.S. The Department of Veterans Affairs created and launched VA Home Loans to reward our members of the United States Military in becoming homeowners. Active and retired members of the U.S. Armed Services with a Certificate of Eligibility (COE) can qualify for VA Loans.

There is no down payment required. Most borrowers do not have to worry about closing costs. Closing costs can be covered with sellers’ concessions and/or lender credit. Borrowers can qualify for VA Loans with bad credit, outstanding collections, and charge-off accounts. However, to get an approve/eligible per automated underwriting system findings, borrowers will need timely payments in the past 12 months.

There are no minimum credit score requirements on VA Loans. VA also does not have a maximum debt to income ratio cap. VA Credit Dispute Guidelines prohibit credit disputes during the mortgage process. Credit Dispute Guidelines do exempt certain types of credit disputes from being retracted during the mortgage process.

Gustan Cho Associates is a mortgage company with no lender overlays on VA Home Loans.

VA Credit Dispute Guidelines And Reason Lenders Do Not Allow It

VA Credit Dispute Guidelines

VA Credit Dispute Guidelines are similar to other loan programs. Lenders do not allow credit disputes during the mortgage process. The Reason is whenever consumers dispute a derogatory credit tradeline, the credit bureaus automatically discount the negative tradeline from the credit scoring model. So, when a consumer disputes a recent late payment, that particular tradeline will be discounted from the scoring model, thus, increasing the credit score of consumers.

Same with collections, charged-off accounts, and other derogatory credit items. When consumers retract the credit dispute, the negative item is factored back into the credit scoring model. Therefore, consumer credit scores will drop. Loan Officers should not be submitting loans to processing/underwriting if there are credit disputes on borrower’s credit reports.

Credit scores with disputes are not accurate.

How To Retract Disputes To Meet VA Credit Dispute Guidelines

Credit disputes will automatically halt the mortgage process. Borrowers will be instructed to retract the credit disputes before proceeding. The reason is that whenever a consumer disputes derogatory credit tradelines, the disputed tradeline is exempt from the credit scoring model by the credit bureaus. Therefore, whenever there is a credit dispute, the credit scores will go up. Chances are borrower’s credit scores will drop once the credit disputes are retracted. How much will it drop?  That depends on how bad and recent the derogatory credit tradelines are.

In cases where credit disputes cannot be removed, the mortgage process can proceed and be downgraded to manual underwriting. FHA and VA Loans allow manual underwriting. Conventional loans do not allow manual underwriting. There are certain types of derogatory tradelines that are exempt from retracting credit disputes. 

Exempt Derogatory Credit Tradelines From Credit Disputes

Derogatory Credit Tradelines From Credit Disputes

Under VA Credit Dispute Guidelines, there are certain tradelines that are exempt from credit disputes. Disputes on medical collections do not have to be retracted under VA Credit Dispute Guidelines. Non-medical collections with zero outstanding balance are exempt from retraction. If borrowers have non-medical collections that total less than $1,000, credit disputes do not need to be retracted. Any derogatory credit items that are older than 24 months do not have to have the credit disputes removed. Borrowers who cannot get their credit disputes removed can get their files downgraded to manual underwriting. For more information in qualifying for VA Loans with credit disputes, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] The Team at Gustan Cho Associates Mortgage Group is available 7 days a week, evenings, weekends, and holidays.

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