November 1, 2010
When a buyer wants to purchase a home with an FHA guaranteed mortgage, FHA requirements include a credit report. The FHA needs to see credit information on all prospective borrowers to establish that the applicant has a good history of on-time bill payments; the FHA also needs to know the borrower’s residence history and related information.
All this information is used to get a “credit picture” of an applicant. But the credit report isn’t just a tool for the lender or the FHA; borrowers should consider running their own credit report at least a year before they apply for an FHA mortgage. There are many reasons for this but one of the most important is to make sure what the applicant reports to the FHA for income, debts and other credit related data matches what’s shown on a credit report.
Discrepancies between the borrower’s description of amounts owed on credit cards, car payments and other credit can delay or even halt the progress of an FHA loan application until those discrepancies are cleared up. A potential FHA mortgage holder may know how much they owe today on those credit card bills, but if you don’t know whether your credit report reflects that information, you’ve got some research to do.
You may need to dispute erroneous information on a credit report, or request that old information be updated to reflect current figures. Don’t assume your credit reports are accurate–mistakes happen in every line of work, including the credit reporting agencies.
If you need to dispute information listed on a credit report, or if you’re disputing information relayed to you by the FHA during the application process, it’s a very good idea to provide supporting information to prove your case.
That information should include receipts, “paid in full” notices and any other proof that your side of the story is the correct one. The more paperwork you can provide to the FHA and your lender, the better. Be sure not to send originals of your evidence; always send copies.
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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