July 7, 2015
A reader question came in recently about FICO scores, medical bills and credit reports; can a borrower’s application be affected by FICO scores that have been lowered due to disputed medical bills and missed payments that may have resulted as part of the dispute? Should a borrower expect difficulty with an FHA loan application if his or her spouse is in such a situation?
The answer may depend on a variety of issues and there are several questions that would need to be answered. Are the spouses applying for the FHA loan together? Do they live in a community property state where state law may dictate how credit issues of both spouses are handled in a legal marriage? That is a very important question–not all states have community property laws and the ones that do may vary from state to state.
Has the borrower disputed his or her credit report? If so, the lender may need to see the details of such a dispute in writing and be given written evidence as to the progress of those disputes.
These are not easy questions to answer–we can’t address them specfically for a lack of further information–but one thing a potential FHA borrower should definitely do is call the FHA directly at their toll-free number: 1-800 CALL FHA. Request a referral to a local, HUD-approved housing counselor who may be able to help answer these important questions.
One thing that some borrowers may be advised to do is to approach the FHA loan application after there is evidence that a resolution to credit disputes may be near–a situation that is not yet resolved but may have a definite outcome in favor of the borrower could be more helpful at application time, assuming the lender can move forward with the loan. Borrowers should be prepared to show that the current dispute is not a pattern, but an anomaly in their credit history.
Frequent credit issues may be, depending on circumstances, more of a red flag on a credit application, but each FHA loan application is different and should be handled on a case-by-case basis. It’s never good to assume you cannot get the credit you need for a home loan–you may learn that your circumstances are more common than you realize and that your lender knows how to deal with some issues that may seem like a barrier to a home loan…at first.
Do you have questions about FHA mortgages? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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