USDA Rural Development Loan Help

[Anonymous]

I am looking to apply for a USDA home loan in a couple weeks.  My fico scores should all be over 620 with some derogatory credit about 2 years ago.  My wife will be over 700 and she has never missed a payment.  I make the majority of our income which should be just under the rural development guidelines.  Our debt ratios should be well within the 29/41 limits.  The 2 things I am concerned about is that we don't have a lot of reserves and I have a collection that I owe 12k on.  I do have a recently opened 401k that has about $5500 in it.  Plus we have an account with Edward Jones, that has about $1500.  I don't have any payment arrangments on the 12k collection yet.  They have been kind of hard to negotiate with and I want to try to save up the cash and get it paid off.  I have had conflicting reports of what I should do.  Can I take care of the collection after the house is purchased?  I would like to purchase a home within the next 2 or 3 months.  Please help!

[Anonymous]

For a collection that big, the underwriters are going to be concerned about them coming after you with a lien on your house which is a vvery big possibility. I also think that payment arrangments have to have one year of satisfactory payments. If you have the money, you will probably need to pay it off before you apply.