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Do I have to pay off all my debts & collections before I can get pre-approved for a home loan?

I was told by a local lender that I have to pay off ALL of my collections before I can get pre-approved for a home loan in a qualifying amount. Is this true? by WhatDoYouMean0158216 from Brentwood, California. Jan 20th 2017 Reply


It all depends on the type of program as well as the type of collection. Charge-offs are typically not required to be paid if explained correctly to the Underwriting Dept.

Jan 21st 2017
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Linda Wintersteen (Linda123)
#63 ranked lender in Arizona - 1,250 contributions

are they medical collections ? lindaonthego@outlook.com

Jan 21st 2017
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Mike and Jill Kohler (LenderMike)
#31 ranked lender in Pennsylvania - 56 contributions

It really depends on the the lender/underwriter and the age and amount of the collections. Every lender sees it a bit differently. Also, it very well may depend on how old the collection accounts are. If that are years old they may be "forgiven" in how underwriters see it. I would speak with a qualified local mortgage loan officer and get their advice.

Jan 22nd 2017
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Jericho Cherry (Jerichocherry)
#58 ranked lender in Virginia - 1,107 contributions

It depends on the lender, the program, and your debt to income ratios.

Jan 23rd 2017
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Laleh Hanks (laleh@americachoicemortgage.com)
#1087 ranked lender in California - 13 contributions

Hi, that really depends on the type and size of the debt. If it has been placed as a lien on title, credit, etc. I can run you a credit simulator so you can see how that debt is affecting credit which will also play a factor in whether or not you should pay that off before application. Laleh(at) AmericaChoiceMortgage.com 888-843-5525

Jan 23rd 2017
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Mark Hemingway (SFSLend)
#1 ranked lender in Colorado - 569 contributions

If they are medical collections then typically you do not have to pay these off for any loan. For other collections you want to still be careful about paying these off if they have not reported for some time as when you do pay them off it will bring the collection trade line current and then could lower your credit score. If your credit is in good shape to get a loan then you can always just show proof during loan process that they have bene paid in full if they are required to be paid. That is the best way in order for the collection being paid off not to impact your score. A lot of people think that paying the collection off will help their score but collections are digested by credit algorithms more by looking at date of last activity.

Jan 26th 2017
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