Revoked FHA credit rule may take some of the hassle out of buying a home

Andrew Cates/Issues columnist –
July 13, 2012

I purchased a house a few weeks ago. The joy of being a first-time homeowner is almost enough to make me forget the crick in my neck from sleeping on an air mattress until the movers come!

I learned firsthand what I had often heard from others … that first-time homebuyers often encounter a number of challenges and unexpected delays. One of those for me was a Federal Housing Authority (FHA) rule that most lenders didn’t like, and that almost brought my dream to a crashing halt.

The rule, which originally went into effect in April but was later postponed to July, affected borrowers such as myself who wanted to qualify for an FHA-insured mortgage but had a credit dispute of more than $1,000. It required these people to pay off the disputed amount or set up a payment plan on unpaid collection accounts.

Now, in my case, I had a mistake on my credit report that I didn’t know about. All of a sudden, I was looking at not getting a home because of someone else’s error!

Luckily, I resolved the situation. Even luckier for you, you don’t have to worry about running into the problem I did. The FHA recently rescinded the rule indefinitely.

The rule was widely criticized by the real estate and lending industries as being too restrictive on homebuyers. They said it would unnecessarily squeeze out a large portion of first-timers like me and would ultimately affect the entire housing market. A survey by John Burns Real Estate Consulting reported that 25% of builders thought the rule would delay or derail as much as 60% of their home sales.

The FHA continues to take comments on the rule and will issue guidance on how to appropriately deal with credit disputes. In the meantime, rest assured that the real estate industry is on the side of responsible buyers who want to get into a nice new home, just like I did.

Now where are those movers?


Andrew Cates/Issues columnist –
July 13, 2012

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