I just submitted my application for a home loan on 6/16. I had no collections on my account. I just got an alert that a $93 medical collection was added. I had thought I paid this back in March but apparently the agency is saying my bank rejected the payment. I was never informed of this and know it had nothing to do with available funds. I went on and paid it again just to try and clear it but the collection agency is refusing to remove it. How significantly will this impact my ability to go conventional? I am cleared for FHA (prior to the collection) and was on the line for conventional. My MLO is working to see if I could get conventional but now I'm nervous about this. Any advice is appreciated!
It should have zero impact on your loan. Your lender must have some odd overlays or your LO is inexperienced
it is not so much the collection that is the problem, you need to check your scores tomorrow , a collection can drop your scores quite a bit and they may be too low to qualify for the loan. Most lenders re check your credit before closing so you need to know what is going on right now with your scores
@Mortgage-Specialist thanks for reassurance! Hopefully that's the case! I informed my LO and he said we will figure it out.
When you submitted your application on the 16th, I assumed your credit was pulled on that day since it should have been. That would have been before the collection appeared. When the underwriter does a soft pull before closing, credit scores don't even populate. They only look to see if you added new debt or opened up new accounts. Since collections doesnt affect debt ratio (unless it's a huge collection) that new collection will have no impact on anything. If your current lender has strict overlays, then they might have an issue. But based on lender who actually follow the true guidelines, you would be more than okay.
@Mortgage-Specialist yes they pulled my credit on 6/16 and the collection was reported on 6/17. I had to pay off one of my credit cards and had an open dispute on another that I had to cancel so they submitted for a rescore. Would that populate the collection with the rescore?