Posted on: 06th Mar, 2012 12:05 am
Are collections required to be paid off even if you meet all of their loan requirements in order to get a FHA loan? I have two collections mentioned in my credit report - a bank overdraft from years ago and a debt to a Credit Union. All these are relatively old 3-5 yrs.
The lender will always want you to pay off the outstanding debt so that no one can place any kind of lien on your property. In case you default the loan, the lender can easily foreclose the property in order to recover his debts.
FHA policy was modified in an FHA bulletin dated February 28, 2012.
If the total oustanding balance of all collection accounts is greater tha $1,000, the Borrower must resolve the accounts, which means pay in full at or before closing or make arrangements to pay monthly and must have paid a minimum of three months before can
close .
If the total outstanding balance is less than $1,000, the Borrower is not required to pay off the collection accounts. However, while that is the FHA policy, any Lender could require they be paid simply becasue they can require that if they choose to do so.
The older the collection accounts are, the less likely a Lender will require they be paid, however, no one can say that all Lenders will not require they be paid. Most will not, but, some will.
If the total oustanding balance of all collection accounts is greater tha $1,000, the Borrower must resolve the accounts, which means pay in full at or before closing or make arrangements to pay monthly and must have paid a minimum of three months before can
close .
If the total outstanding balance is less than $1,000, the Borrower is not required to pay off the collection accounts. However, while that is the FHA policy, any Lender could require they be paid simply becasue they can require that if they choose to do so.
The older the collection accounts are, the less likely a Lender will require they be paid, however, no one can say that all Lenders will not require they be paid. Most will not, but, some will.
