Recently, the FHA (Federal Housing Administration) made an announcement: Starting April 1 FHA will no longer insure mortgages to borrowers who have an ongoing credit dispute of $1,000 or more on their file.
Consideration for an FHA-backed loan, requires borrowers either:
- Have to pay the remaining balance on the credit dispute or
- Enter into a payment plan, making at least three payments on it.
Any payment plans need to be fully documented and submitted to the FHA, to be included in the debt-to-income ratio for the new mortgage.
Excempt from the FHA’s new rule are:
- Disputed credit accounts from more than two years ago or
- Any accounts related to reported identity theft.
According to FHA, the rule is targeted at protecting the FHA’s emergency fund, which is currently below the mandated amount required by Congress.
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