FHA and Collection

[swflben]

Hi all,

I am suppose to close on my first home next month. I have an old collection on my report for $2,500. My lender has seen the collection from the beginning, they just told me that I will be required to pay this prior to closing.

From everything I’ve read, and heard from another mortgage broker — it shouldn’t be an issue as long as the 5% of that doesn’t take me over on DTI.

But the lender is stating anything over $1,999 needs taken care of and if it was less than $1,999 they could use the 5%. Can anyone offer some guidance?

[kc0039]

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@swflben wrote:
Hi all,

I am suppose to close on my first home next month. I have an old collection on my report for $2,500. My lender has seen the collection from the beginning, they just told me that I will be required to pay this prior to closing.

From everything I’ve read, and heard from another mortgage broker — it shouldn’t be an issue as long as the 5% of that doesn’t take me over on DTI.

But the lender is stating anything over $1,999 needs taken care of and if it was less than $1,999 they could use the 5%. Can anyone offer some guidance?

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It depends on what our Automated Underwriting System (AUS) says. It also depends on overlays. If AUS states that if there are collections and the total aggregate is over $2,000, either it must be paid or use 5% of the balance as the payment. This is the verbiage that should be shown in AUS. It might be an overlay for your lender

[NC_Mtg_Loaner]

Sounds like your being subject to an additional investor/lender overlay.