If you have unpaid collections you can still qualify for a mortgage. Many lenders will allow up to $5000 in unpaid collections to remain open and unpaid.

The type of mortgage you qualify for with open collections will depend on the type and amount of outstanding collections. Many lenders will ignore medical collections all together, while looking at the dollar amount and date of the collection to determine which they will be required to count. Even if you have over $5,000 in collections some lenders will still be able to do the loan for you as long as they were not incurred within the last 12 or 24 months.

By leaving collections open you will only be able to get a sub prime mortgage. Your interest rate will be much higher then it would be if you pay your collections off and go with a conforming loan program.

How old are your collections? Many lenders will disregard collection accounts that are over two years old meaning the accounts can remain unpaid. If older collection accounts are an issue for you be sure your mortgage broker knows about this ahead of time.

The type of debt also plays an important role whether a lender bank requires that you pay off the collection. Collection on student loans, for instance, is not regarded as serious as a credit card debt collection.

Five or more collections, no matter how large or small, will drastically reduce your credit scores. Although lenders might ignore certain types of collections, it is always best to pay them off.