Refi Cash Out with Medical Bill Collections

[gabbygail]

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I have a 2023 medical collections bill on my credit report. I don't owe it and have been fighting to get in removed. I have full insurance and it was a coding error on medical billing side. 

I recently did a  mortgage refi cash out with AmeriSave and they didn't  have any problem with this on my credit and didn't require it to be resolved before loan closed. 

So that was good news. 

[ShanetheMortgageMan]

If it's a mortgage transaction on a 1-unit primary residence most loan programs don't require medical nor non-medical collections to be paid.  

For a second home or investment property transaction it's a little different, Fannie Mae specifies that medical collections to not need to be paid, but on 2-4-unit owner-occupied and second home properties, all non-medical collection and non-mortgage charge-off accounts exceeding a total of $5,000 must be paid in full before or at closing, while for investment properties (1-4 units), any individual account of $250 or more, and all such accounts totaling over $1,000, must be fully paid prior to or at closing.

Freddie Mac doesn't require medical or non-medical collections to be paid if an automated underwriting approval is obtained, but lenders can have overlay guidelines.  Usually those overlay guidelines mimic Fannie Mae's in the previous paragraph.

For second homes and investment properties there are other loan programs that don't require medical or non-medical collections to be paid too, but the usual tradeoff is those types of programs interest rates are higher.

[gabbygail]

Good to know. Thank you .