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.

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.

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.

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.

Collections account - If you have open collection accounts, you can still get a loan. Often the lender will require you to pay them off, or to pay off certain accounts, even if they are for very small amounts. If you have the ability, you should pay off your valid collection accounts as soon as possible.

Many non-prime banks have loan programs that ignore certain non-essential collections. However, borrowers of this type of sub-prime loans ought to expect to pay a little higher interest rates.

Request a free copy of your credit report to see if there are any collections on there that you were unaware of. This should be done well before the time you plan on getting a new mortgage. You may be able to dispute the ones that are incorrect, and this should help raise your credit score.

Most subprime lenders will ignore medical collections and collections that are over 2 years old. If however you want a conforming loan you will need to pay all open collections off at the time of close.

All subprime lenders, lenders for people with below average credit or whom need some type of creative financing, have their own guidelines on how to deal with collection accounts. Most of them will allow open collections up to 2,500 or even 5,000 to remain open. A few lenders will not require any collections to be paid off no matter how much is owed in collection accounts and others will require that all collections be paid off regardless of the amount. Therefore it is crucial to discuss your open collection with your loan officer and let him/her know of what your intentions are with the collections and if you want to pay them off through the loan or if you would prefer not to pay them off now. This may dictate which lenders you have available to use and get qualified for a mortgage loan with.

Even small unpaid collections can effect your credit score dramatically. To make sure your credit scores are as high as they can be, pay off any known collection accounts well prior to applying for financing. Many times a consumer will need to follow up with the credit bureaus after paying off a collection to ensure that the account is reported correctly as "Paid".

Open collections accounts can also be paid off in your refinance and rolled onto the loan itself.