Can I Qualify for a mortgage with poor credit?

Be careful what you dispute

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When you dispute an account on your credit report, the credit bureaus temporarily remove the account from the credit score calculation. As a result, if a credit report shows disputed accounts, lenders typically will subject the loan application to extra scrutiny. How a lender reacts may depend on the loan program, and in some cases, you cannot qualify unless you rescind the dispute from the account.

Qualifying for a conventional loan with a dispute recently has become easier. Fannie Mae and Freddie Mac allow a lender to ignore a dispute if their underwriting computer programs so indicate. Experience with this new guidance has been positive; however, you still may have to rescind new disputes on non-medical accounts. New disputes can temporarily improve your credit score, and conventional loans have minimum score requirements.

FHA's guidelines are a little more complicated. Again, it allows lenders to ignore medical accounts (such as medical collections). FHA also allows lenders to ignore disputed accounts with a zero balance and those with no late payments in the last 24 months. For all other disputed accounts, if the total of the account balances is $1000 or more, the lender must manually underwrite the loan, which subjects you to more restrictive qualifying criteria.

Removing a dispute should be easy, but customers have reported varying degrees of frustration. Your starting point is to order your credit report from all three credit bureaus through (unless you have another source for your credit report). A dispute may not appear on all three reports, and you only need to remove the dispute from the bureaus where it appears.

Your next step is to contact the credit bureaus that show the dispute. TransUnion and Equifax seem to be more helpful than Experian. The bureaus may ask you to send a letter requesting the removal, and it's possible they will want to verify the dispute removal with the account creditor. In this case, the removal could take up to 30 days. Your lender may have a service that will almost instantly remove the dispute. However, the bureaus use this as a money-making operation, and it can be expensive.

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