It depends on the loan program and their guidelines. I believe for a Conventional loan...
Collection accounts totaling more than $5,000 must be paid off in full before your mortgage closes.
FHA loan standard underwriting
the total balance of your collection accounts is $2,000 or more, you are required to either pay off the account balance in full or establish a payment plan. Please note that for an FHA mortgage, medical account collections are excluded from your total account balance.
Manual Underwriting
If you have a collection account and your lender manually underwrites your application, the lender is required to provide documentation that explains the reason why your application should be approved. The lender is also required to review the circumstances that caused the account to go into collections.
You are required to provide a letter of explanation that addresses each collection account including why the issue occurred and the steps you took to resolve the issue. Depending on the documentation provided by your lender and you, and the circumstances that caused the issue, your application may be approved or rejected.
USDA Home Loan - Manual Underwriting. If your lender manually underwrites your loan, the lender is required to submit a letter that explains the collection account and why your application should be approved. You are also required to provide a letter of explanation for each collection account as well as any supporting documents that demonstrate how you addressed the issue.
VA loans have their own guidelines, along with the lender tequirements..
Bottom line is, just deciding NOT to pay the debt probably won't be good enough for lenders, and if you are OVWR the $5k/2K threshold you won't qualify irregardless...but I am sure there are others on here who can chime in.
Sources
"B3-5, Collections, Charge-Offs of Non-Mortgage Accounts, Judgments, and Liens." Selling Guide: Fannie Mae Single Family. Fannie Mae, February 5 2020. Web.
"Chapter 4.7.b Collection Accounts." Lenders Handbook - VA Pamphlet 26-7. U.S. Department of Veterans Affairs, 2020. Web.
"II.A.4.b.iii.(A). Collection Accounts, Charge Off Accounts, Accounts with Late Payments in the Previous 24 Months, and Judgments (TOTAL)." FHA Single Family Housing Policy Handbook 4000.1. Federal Housing Administration, January 2 2020. Web.
"Chapter 10, Attachment 10-A, Collections." Single Family Housing Guaranteed Loan Program Technical Handbook. U.S. Department of Agriculture, 2020. Web.
