According to recent reports, the Federal Housing Administration (FHA) is about to make it even harder to borrow money from the government to purchase a home. Beginning April 1, those individuals who are in ongoing disputes with their creditors on debts over a $1,000 may no longer qualify for FHA-insured loans. Even those with perfect credit scores can be denied over a single $1,000 debt dispute. Before this, individual lenders decided whether debt disputes constituted grounds for denial. You could be fighting a charge, say a hospital bill, and your lender might still decide that your credit history merited an approval. Now, a lender will have to justify the approval to the FHA and back its decision with 
documentation.
The new rule is part of the agency’s effort to reduce risk as it grapples with depleted reserves that have fallen below those mandated. The FHA insures those mortgages which originated with private banks. To help bolster its capital, FHA plans to raise the insurance premiums it charges borrowers beginning April 1, 2012.
The requirements are for the homebuyer’s own good, said Tiffany Thomas Smith, deputy press secretary for the U.S. Department of Housing and Urban Development, FHA’s parent agency. “It’s a way of protecting consumers from getting into loans they ultimately can’t afford.”
The new rule will require that individuals with loans in dispute that add up to a $1,000 or more to pay off the debt, or prove they’re making payments on the loans. Otherwise, they will have to explain why the disputed loan is wrong and provide written evidence before they can close on a FHA loan.
