Paying Off Collections - FHA Loan
This question comes up a lot, of FHA Requires Collections to be paid off when you get an FHA Loan. The answer is no, FHA has no requirement for collections to be paid off. Just like FHA has no requirement for a minimum 580 credit score.
Even though FHA does not require collections to be paid off, many lenders do. If your lender is requiring you to pay off collections, there is not much you can do about it other than go to a different lender. We do not require collections to be paid off at my company.
We would rather see the borrower keep the money in the bank than spend it on paying off collections. Once the collection happens, paying it off doesn’t change anything.