Here is my situation: Hubby and I were "approved" by an overly eager LO who said "sure.. you're fine, go shopping!" We had to switch lenders because of a new grant program our state was offering that she did not deal with. Once we got with the new LO, he ran our credit and put us through an automatic underwriting program for FHA. The system came back "refer with caution", which basically means "denied". LO said he doesn't know exactly why the system didn't like us, but he suspects it's a combination of the following:
1. an open dispute on a medical collection that was paid the same day we saw it on hubbys credit report. This was in Oct 2011.
2. A combination of small balances on our credit cards totaling $700.
3. # of inquiries. We just purchased a car in November 2011, so I guess there are a few auto loan inquiries. Other inquiries were from Kohls cards for hubby and I in Oct-Nov 2011.
Mid scores for us are 686 and 692.
LO suggested we close the dispute with all three bureaus, and pay off credit cards. So we did both of those things this week. My question is, how long will it take for credit reports to update the dispute as being closed? Is an open dispute a common denial for automatic underwriting? Can we just explain ourselves to an actual person about the inquiries, as the computer obviously can't understand common sense and explanations. Do you have to be perfect for automatic underwriting to approve you?
I'm very nervous knowing that buying our first home is riding on the advice of a computer program!
Starting Score: 722
