In the new year I am trying to purchase my first home & learning all this information has been overwhelming. Anyone with information on the process during COVID . I am a self employed borrower.
Fico 2,4,5 are what lenders will be pulling for credit requirements ?
I called all 3 credit bureaus and asked for dispute remarks to be removed for when I apply, will this drop score? These dispute remarks were for closed disputes (I'm guessing they should already be factored into my FICO score as long as dispute was completed).
I also have older collections, is it correct lenders are focused on collections and charge off in the last 12 months ?
The short answer is "it depends". We bought a new home this past spring. Thanks to COVID-19, our lender rescinded our approval because it changed its internal standards. So, with one month to the closing date, we had to pivot and switch lenders. Turned out better, actually, we got a lower rate and they were still able to close within 2 days of our targeted date.
Some lenders changed their internal guidelines, others did not. One thing that changed was that the lender conducted additional employment verifications over what they used to do pre-covid. They actually checked 3-4 times for us. Apparently, since COVID messed with some people's jobs, there were a lot of people who were approved, only to lose their job to the pandemic.
My best advice would be to sit with your agent/broker/lender, whatever title they use, and ask them to help you determine how far off you currently are from what would be needed. We knew we wanted to do, but when we actually sought preapproval, we were actually just trying to see how far away from qualifying we were, so that we had a game plan of what work we needed to do. Turns out, we got two preapprovals right out the gate. We didn't end up going with either of those lenders, but it showed us that we were better prepared than we thought we were. Now, we have our dream home, and at 3% fixed, we're actually spending about $60 less per month on P&I than we were on renting.
As for collections and charge-offs, I would not think that they only focus on the last 12 months. They will want to make sure that you don't have anything hanging around that's large enough to mess with your ability to pay a mortgage payment now. Example, suppose you had a $10,000 collection from three years ago that's still unpaid.....if that creditor sued you in 6 months from now, and garnished your wages, it could make a mortgage payment unaffordable. That's the kind of thing they won't allow. So it depends on your specific credit--how many negative accounts, what is still unpaid, and so on. Best bet, if you have collections and charge-offs on your credit, best general rule is to work to clear those up before you apply. Even if you could show you were on a payment arrangement and were paying for some months as agreed, that might be enough for some underwriters to still approve you. Again, though, it depends on your specific situation--how much you make, how much you owe in collections, etc.
Once a dispute is resolved, the CRA should update the dispute flag to show that the dispute was concluded, such as by the statement "FCRA dispute, meets FCRA requirements" or something to that effect.
The fact of a prior dispute must be retained in the consumer's credit file for several reasons, so it normally wont be deleted.
However, once updated to show the dispute was concluded, it should no longer have any scoring impact or effect on credit underwriting.
It may spur some questions from a prospective lendor, so I can see why total removal might be desirable, but that will likely be resisted by the CRA if they have properly remarked that the dispute was concluded.
Do you mean that you want the dispute remarks updated to show that the dispute was concluded, or are you actually seeking to have the CRA delete anything referencing the fact of a prior dispute?
Just to update so when a lender pull the credit report it shows the dispute was concluded. I am basically trying to get everything in order before I apply for an FHA loan in Feb.
I just closed on an FHA loan in September with an account listed with something to the nature of "Account was disputed, now resolved." It was an account not included in BK that had perfect payment history, $0 balance and closed by me. It was listed as IIB. The comment had zero impact on my approval and things went smooth.
I've heard it only impacts Conventional loans...maybe I heard wrong.
Best of luck!