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Open Credit Report Disputes Can Sabotage Your Chance For a Mortgage

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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After months of searching through listings, you’ve finally found your dream home. Your offer has been accepted and you’ve started daydreaming about future dinner parties, contemporary light fixtures, and planting a backyard herb garden. Just one problem — the financing hasn’t been approved.

The mortgage underwriting process can seemingly last a lifetime when it’s standing between you and your dream home. However, the timeline hasn’t always been such a nail-biter for prospective homebuyers.

The housing bubble leading up to The Great Recession created a hunger from investors for mortgage-backed securities. As a result, borrowing costs were lowered, lending standards were loosened, and many homebuyers were approved for loans they couldn’t afford. When the housing market collapsed, many Americans were in trouble. These predatory lending practices contributed to both the financial crisis and The Great Recession.

A direct response to The Great Recession, the Dodd-Frank Wall Street Reform and Consumer Protection Act or “Dodd-Frank” was signed into law in 2010. This financial reform legislation included the creation of the Consumer Financial Protection Bureau who established the Ability to Repay and Qualified Mortgage Standards Under the Truth in Lending Act.

These new standards include a much more comprehensive financial verification process for mortgages including a closer look at an applicant’s credit history.

Why Do Credit Scores Matter?

Before you begin the home buying process, it’s smart to review your credit report and have a copy of your FICO score handy. Your FICO score is assigned by the credit reporting agencies based on the information within your credit report. A FICO score also factors into your Ability to Repay qualifications.

Tip: You can request a free credit report once a year from AnnualCreditReport.com.

Credit scores aren’t the only thing mortgage loan officers worry about, but a FICO score can heavily influence the interest rate you are able to secure. The highest scores qualify consumers for the best possible mortgage rates.

It’s critical to arm yourself with this information in advance. Plus, it gives you the opportunity to dispute any inaccuracies you’ve discovered and clean up your report.

What is a Credit Report Dispute?

Credit report inaccuracies are relatively common. Inaccurate information can happen for a variety of reasons — a clerical error, a shared name, or even identity theft. And inaccurate information in your credit report can harm your score. That’s why it’s important to regularly keep track of what’s happening.

Under the Fair Credit Reporting Act (FCRA), consumers have the right to dispute inaccurate information. Fortunately, it’s easier than ever to file a dispute with all three credit reporting agencies online.

The problem is, many disputes can go unresolved for long periods of time. An unresolved dispute can be particularly troublesome for consumers applying for a mortgage. Many applicants don’t realize an open credit report dispute can raise a red flag to lenders, and may even prevent mortgage approval.

[Learn more about Fannie Mae’s Frequently Asked Underwriting Questions here.]

How Open Credit Report Disputes Hurt a Mortgage Application

If open credit report disputes are relatively common, how can they hurt a mortgage application?

When a dispute is filed, credit reporting agencies are required to label the item as “in dispute.” An item being actively disputed can not harm your FICO score. In fact, your score will be temporarily inflated while harmful items are being investigated.

Lenders know credit reports with disputed items are not the most accurate picture of a consumer’s history and many require for this status to be removed before approving a mortgage application. This leaves some consumers with a difficult decision to make — accept costly credit report errors or delay applying for a loan until disputes have been resolved.

Fannie Mae & Freddie Mac

Fannie Mae’s automated underwriting system, Desktop Underwriter (DU), automatically issues the warning message “consumer disputed” when a credit report reveals a 30-day or more delinquency reported within 2 years of the inquiry. The lender must confirm the accuracy and completeness of the borrower’s credit report by obtaining a new report without the dispute or manually underwrite the loan.

Loan Prospector, Freddie Mac’s automated underwriting system, follows a similar process. Gaining access to a new credit report with updated information is not an option for the borrower if the creditor won’t correct the information. And when a consumer files a complaint with the credit reporting agencies (TransUnion, Equifax, and Experian), the agencies will often defer to the creditor.

Last fall, the National Consumer Law Center wrote a letter to the Federal Housing Finance Agency, urging reform for the treatment of consumers with credit report disputes. They believe lenders who reject applicants because they don’t want to manually underwrite the loan are in violation of the Equal Credit Opportunity Act (ECOA).

FHA Approved Mortgages

FHA approved mortgages will approve an application with a disputed credit report, however, the process may still be time consuming.

A couple of years ago, the U.S. Department of Housing and Urban Development decided to look more closely at open disputes and provided new instructions for lenders in a Mortgagee Letter (ML). This ML addresses both derogatory and non-derogatory disputes and requires lenders to more carefully evaluate the risk associated with a consumer.

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What To Do if You’re Still Struggling

Dealing with an unresolved credit report dispute can turn into a consumer nightmare. Even if you’ve followed best practices, like submitting credit report disputes both in writing and online, you may still be unhappy with the results.

Fortunately, you can still submit a complaint to the Consumer Financial Protection Bureau. They will forward your complaint directly to the company in dispute and work to get a response from them. Another option is to seek guidance from a consumer advocate or an attorney. The National Foundation for Credit Counseling may be a helpful place to start.

Because a credit report and FICO score have such a strong influence on lifelong financial health, the best defense is to be proactive. Regularly monitoring your credit report and working to fix inaccuracies before applying for a mortgage is the best way to prevent major problems.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kate Dore
Kate Dore |

Kate Dore is a writer at MagnifyMoney. You can email Kate at kate@magnifymoney.com

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Mortgage

Maine First-Time Homebuyer Programs

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Do you want to live in a state with gorgeous seaside views and fresh lobster? Maine just might be the right place. Whether you’re new to the state or already call it home, if you need help coming up with a down payment, Maine offers several programs designed to help first-time homebuyers make their homeowning dreams a reality.In January of 2019, we researched first-time homebuyer programs in Maine, which included a review of the Maine State Housing Authority website and other state resources. Here’s what first-time homebuyers in Maine need to know.

Maine first-time homebuyer programs

The Maine State Housing Authority administers several federal and statewide programs aimed at providing affordable homeownership for Maine residents.

Their programs provide fixed-rate mortgages and assistance with down payments and closing costs to help put homeownership within reach. Their mortgages also come with payment protection, in the event that buyers face unemployment.

Eligibility for Maine assistance

Homebuyers who wish to take advantage of one of the Maine assistance programs must meet income and purchase-price limitations. Income and purchase-price limits vary, depending on how many people live in your household and the county in which you buy a home. You can find a list of current income and purchase-price limits online.

Eligible properties include new and existing single-family homes, owner-occupied two- to four-unit apartment buildings and condominiums. Manufactured homes located on owned land and built within the last 20 years are also eligible. However, the purchase-price limit for single-wide and double-wide manufactured homes is $150,000.

MaineHousing First Home Loan Program

The MaineHousing First Home Loan Program provides low fixed-interest-rate mortgages with low or no down payments. It can also provide up to $3,500 in assistance with down payments and closing costs.

Features

The First Home Loan Program offers

  • Thirty-year fixed-rate mortgages
  • Low or no down payments
  • Up to $3,500 in down payment and closing cost assistance
  • Low fixed interest rates
  • Low- and no-point options
  • The option to finance between $500 and $35,000 for necessary home improvements in the same loan

Eligibility

In order to participate in the program, you must

  • Have a minimum credit score of 640.
  • Take an approved homebuyer education class before closing if you take advantage of the down payment and closing cost assistance option.
  • Contribute at least 1% of the loan toward the purchase price of your home (the cost of the homebuyer education class counts toward this 1%).
  • Be a first-time homebuyer (not have owned a home within the past three years) or a veteran, retired military or on qualified Active Duty.
  • Meet household income limits, which vary by county and household size.

How it works

The First Home Loan Program is available through a network of approved banks, credit unions and mortgage companies. You can begin the application process by contacting one of more than 40 approved lenders. The lender can help you determine how much home you can afford, decide on the right mortgage program and take you through the process of applying for and closing on the loan.

Learn more

MaineHousing Salute ME & Salute Home Again programs

The Salute ME and Salute Home Again programs help qualified active duty, veterans and retired military personnel achieve homeownership by giving them a 0.25% discount on First Home Loan mortgages.

Features

The Salute ME and Salute Home Again programs offer

  • An additional 0.25% discount on 30-year mortgages offered through the First Home Loan Program
  • Low or no down payments
  • Up to $3,500 in down payment and closing cost assistance
  • Low fixed interest rates
  • Low- and no-point options
  • Option to finance between $500 and $35,000 for necessary home improvements in the same loan

Eligibility

In order to participate in the programs, you must

  • Take an approved homebuyer education class prior to closing if you take advantage of the down payment and closing cost assistance option.
  • Have a minimum credit score of 640.
  • Be on active duty or have been honorably discharged from military service, have served on active duty for 180 days or within a war zone.
  • Use your new home as a primary residence.
  • Meet household income and purchase-price limits, which vary by county and household size.

How it works

MaineHousing programs are available through a network of approved banks, credit unions and mortgage companies. You can begin the application process by contacting one of more than 40 approved lenders. The lender can help you determine how much home you can afford, decide on the right mortgage program and take you through the process of applying for and closing on the loan.

MaineHousing Mobile Home Self-Insured Program

The MaineHousing Mobile Home Self-Insured Program allows manufactured/mobile home buyers to get higher loan-to-value (LTV) mortgages and pay a higher interest rate instead of mortgage insurance premiums (MIPs).

Features

The Mobile Home Self-Insured Program offers

  • Up to 30-year loan terms
  • Down payments as low as 5%
  • Up to $3,500 in down payment and closing cost assistance
  • The option that 3% of the purchase price may come from a seller contribution
  • The option to add up to $35,000 to the loan for repairs

Eligibility

In order to participate in the program, you must

  • Be a first-time homebuyer (not have owned a home in the past three years), have only owned an unattached manufactured/mobile home on leased land, or be a veteran.
  • Pay a maximum of 33% of your income toward housing and have a maximum total debt-to-income (DTI) ratio of 41%.
  • Have a minimum credit score of 640.
  • Meet income limits, which vary by county and household size.
  • Have a maximum purchase price of $150,000.
  • Purchase a single-wide or double-wide manufactured home that is less than 20 years of age and is permanently attached per code at the time of closing.
  • Move into the home as your main residence.
  • Not use more than 15% of the home for a trade or business.
  • Contribute a minimum of 3% toward the purchase of the home.

How it works

MaineHousing programs are available through a network of approved banks, credit unions and mortgage companies. You can begin the application process by contacting one of more than 40 approved lenders. The lender can help you determine how much home you can afford, decide on the right mortgage program, and take you through the process of applying for and closing on the loan.

National first-time homebuyer programs

If you want to buy a home in Maine, you’re not limited to first-time homebuyer programs available through the Maine State Housing Authority. There are other federal programs available to help first-time homebuyers across the country. If you’re interested in learning about national programs, start by checking out LendingTree’s guide to first-time homebuyer programs nationwide.

This article contains links to LendingTree, our parent company.  The information in this article is accurate as of the date of publishing.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Janet Berry-Johnson
Janet Berry-Johnson |

Janet Berry-Johnson is a writer at MagnifyMoney. You can email Janet here

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Rhode Island First-Time Homebuyer Programs

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Buying a new home is a scary prospect — and not just because change can be overwhelming. Figuring out how to afford a down payment, closing costs and monthly mortgage payments can feel like an Olympic gymnastics routine. Luckily, first-time homebuyers in Rhode Island have several programs that can provide assistance.

Whether you’re looking to pay less in taxes or you need help covering a down payment, the state’s solutions may be able to help you. We reviewed the state’s offerings to help you pick the best program for you.

Rhode Island first-time homebuyer programs

Rhode Island Housing offers affordable housing programs designed to make living in the state more attractive and affordable — no matter your financial situation. Not sure how to start your homebuying journey? The organization offers first-time homebuyer education for all buyers to help you understand the ins and outs of this complicated process.

But there’s real money available, too. The programs below offer down payment assistance, tax credits and affordable mortgages. They can even help you avoid paying mortgage insurance.

Eligibility for Rhode Island assistance

All of Rhode Island Housing’s first-time homebuyer programs — except for the First Down Program — require purchasing a house that costs no more than $441,176. Your new home can be a one- to four-unit home or a condominium.

And, of course, you must be a first-time homebuyer.

FirstHomes100

What is it?

Rhode Island Housing’s FirstHomes100 program helps first-time homebuyers at any income level afford a new place. The program combines a traditional mortgage with down payment assistance funds so you can finance your home 100%.

The FirstHomes100 program offers first-time homebuyers

  • One hundred percent financing
  • Assistance with down payment or closing costs through low-interest, 15-year loans
  • The ability to forego mortgage insurance in exchange for a slightly higher interest rate.

Requirements

In order to qualify for the FirstHomes100 program, you must

  • Purchase a house that costs no more than $441,176.
  • Buy a one- to four-unit single-family home or a condominium.

How to apply

If your income is less than $93,623 for a one- or two-person household, or less than $107,667 for a household of three or more, you’ll need to work directly with Rhode Island Housing’s Loan Center. Homebuyers with higher incomes can contact any participating lender to begin the loan application process.

Learn more

FirstHomes100+

What is it?

FirstHomes100+ is the sister program of FirstHomes100. It allows first-time homebuyers to not just purchase but also renovate the home of their dreams. Once buyers are approved for a FirstHomes100 mortgage, they’ll work with a consultant from the U.S. Department of Housing and Urban Development (HUD) to determine what repairs are needed. Once the final costs are determined, and if they exceed $5,000, the loan will become an all-inclusive FirstHomes100+ loan.

FirstHomes100+ provides buyers with

  • One hundred percent financing to buy and renovate the home of their choice.
  • Assistance with down payment or closing costs through low-interest, 15-year loans.
  • The ability to forego mortgage insurance in exchange for a slightly higher interest rate.

Eligibility

To be eligible for FirstHomes100+, first-time buyers must

  • Purchase a house that costs no more than $441,176 and that requires a minimum of $5,000 in renovations.
  • But a one- to four-unit single-family home or a condominium.
  • Complete FHA 203(k) Homebuyer Education before closing.

How it works

Buyers with incomes of less than $93,623 for a one- or two-person household or less than $107,667 for a household with three or more people will work directly with Rhode Island Housing’s Loan Center. If your income is higher, you can contact any participating lender to apply for the program directly through them.

Learn more

FirstHomes Tax Credit

What is it?

The FirstHomes Tax Credit is a federal tax credit for part of the mortgage interest you pay in a given year. A tax credit directly reduces the tax amount you owe. You can claim the tax credit every year, making this program helpful for years to come. Reduce your taxes even further by itemizing and deducting any other mortgage interest you’ve paid.

The FirstHomes Tax Credit offers buyers

  • A mortgage credit certificate for 20% of the total mortgage interest you pay each year.
  • Maximum credit of $2,000 a year.

Requirements

To be eligible for the FirstHomes Tax Credit, buyers must

  • Purchase a house that costs no more than $441,176.
  • Be buying a one- to four-unit home or a condominium.
  • Plan to live in the home as their primary residence.
  • Have income of less than $93,623 for a one- or two-person household, or less than $107,667 for a household of three or more.
  • You don’t have to be a first-time homebuyer if you live in the federally targeted areas of Central Falls, Pawtucket, Providence and Woonsocket.

How to apply

Ready to get started? Get in touch with Rhode Island Housing’s Loan Center or reach out to any of the approved lenders.

Learn more

First Down Program

What is it?

The First Down Program helps first-time homebuyers in the counties most affected by the recent foreclosure crisis. Through this program, buyers receive down payment assistance in the form of a second mortgage. As long as you live in the house full-time for five years, the assistance is forgiven. If you sell, refinance or no longer use the property as your primary residence, you’ll need to repay part of the loan.

The First Down Program offers buyers

  • A forgivable down payment assistance loan of $7,500.

Requirements

To be eligible for this down payment assistance program, first-time buyers must

  • Treat the home as their primary residence.
  • Purchase a home that costs no more than $454,250.
  • Be buying a one-to-four-unit home or condo.
  • Live in Cranston, Pawtucket, Providence, Warwick or Woonsocket counties.
  • Have income of less than $93,623 for a one- or two-person household, or less than $107,667 for a household with three or more people.

How to apply

Funds for this program are limited. Reach out to Rhode Island Housing’s Loan Center or a participating lender to get started.

Learn more

National first-time homebuyer programs

Rhode Island offers several helpful programs for first-time homebuyers, but buyers in the state should consider looking to nationwide programs, too. These programs can help you find an affordable mortgage, down payment and closing cost assistance, and federal tax credits.

LendingTree’s guide to first-time homebuyer programs can help you find the solution that works best for you.

This article contains links to LendingTree, our parent company.  The information in this article is accurate as of the date of publishing.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jamie Wiebe
Jamie Wiebe |

Jamie Wiebe is a writer at MagnifyMoney. You can email Jamie here

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