How do FHA Loans Handle Collections and Judgements?

You may be wondering how you could ever be approved for an FHA mortgage with collections and/or judgments on your credit report. Not to worry, you may still qualify for an FHA mortgage! And if you work with us you may have a better chance of being approved. We are one of the TOP 10 Teams in the industry for FHA purchase closings!

There are some important steps you will have to take in qualifying for your FHA mortgage if you have collections or judgments on your credit report. First of all, make sure that you discuss any collections or judgments with your loan officer when applying for your mortgage. They will have some important questions to ask you to help determine if an FHA loan program is the best option.

For example, before you can apply for your mortgage any judgments must be paid in full or have a payment agreement in effect for at least three months with a satisfactory payment history. You will be asked to provide documentation of the payment arrangement and a good record of payments. We will also ask for some additional documentation from you including a letter explaining the judgment and how you are handling it.

If you have collections that are equal to or greater than $2,000 then:

  • By the time your loan closes the collection accounts must be paid in full.


  • You must make payment arrangements with your creditor and provide to us a credit report or letter from your creditor verifying the monthly payment.


  • Let us know if you cannot provide evidence of a payment arrangement so we can adjust our calculations.

What if your spouse has a collection or judgment even if they will not be on the loan with you? The amount of the collections or judgment may be included in your debt-to-income totals. However, if your spouse’s collections or judgment happened prior to your marriage, we may be able to exclude it. We will just need a copy of your marriage license as documentation of the date of your marriage.

The bottom line is that you may still be able to qualify for an FHA mortgage, even with collections and judgments on your credit report, we’ll just have to do a little extra homework.

What can you do? Make sure to discuss any credit issues that you foresee, like past judgments or collections with your loan officer right away. They can guide you and help you decide what would be the best loan program based on your situation. Also, make sure you start gathering any documentation you have regarding collections and judgments and always take good notes when speaking with creditors regarding your accounts.