How does a disputed account on your credit affect USDA loan qualifying?

What are the unintended mortgage consequences of disputing an account on your credit report?

While this may seem like an innocent issue at first, the end result can be harmful and in today’s video I will explain how a disputed credit account can affect USDA loan qualifying.

Remember, due not get overwhelmed with the details because that is where we step in to help. As a USDA Approved Lender, rely on our experience and expertise to help walk our customers through the qualifying process step-by-step.  Just call or email to discuss your scenario and let us show you the “Metroplex” difference!

USDA Loan Guidelines for Disputed Accounts

As a starting point, the mere presence of a disputed account does not automatically deny an applicant’s USDA loan, but it does trigger additional scrutiny and the potential of further review under more stringent USDA manual underwriting guidelines which can require additional documentation such as letters of explanation, verification of rent, and more restrictive qualifying ratios.

Per USDA Guidelines under the 3555 Handbook, “Disputed accounts on an applicant’s credit report are not considered in the credit score.”

Further, when there is a disputed account on an applicant’s credit report, a loan will require more stringent underwriting requirements unless one of the following is present:

1. The trade line has a zero dollar balance, or
2. The trade line is marked “paid in full” or “resolved,” or
3. The disputed trade line has a balance owed of less than $500 and is more than 24 months old.

To help put this into real world perspective, a homebuyer who was recently having trouble with their lender, was recommended to us for our USDA 2nd Opinion Service (SOS) due in part to a disputed account on their credit report.

However, after careful review, I found that the disputed account in question actually had no balance, and as we discussed above, this would not automatically require more stringent USDA manual underwriting guidelines.

As a result, we were able to qualify them for a USDA loan even though a disputed account was on their credit report.

We realize USDA qualifying guidelines can be complicated, but that is where we step in to help.  My team is built to help walk homebuyers through the USDA process step by step.

Just simply call or email to discuss your scenario, schedule a convenient call back time, or complete our 1-2-3 online pre-qualifier to get started.

(800)806-9836 Ext. 280
SeanS@MPLX.org

I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!