COLLECTIONS- FHA Mortgage applicants are not required to pay off all collection accounts. However, outstanding collections will reflect on your creditworthiness overall and may be held against you. In this case, one or more of the collections may need to be paid off in order to improve your credit score and show your willingness to pay debts. Depending on the collections account you may need to pay them off if they are cumulatively over $2000.
JUDGMENTS- Court-ordered judgments must be paid off in order for an application to be eligible for an FHA mortgage which is a requirement of an FHA loan. Occasionally, an FHA mortgage lender may accept documentation that shows you have agreed to pay and have paid at least 6 months on a repayment plan towards the judgment, instead of requiring you to pay the full amount off beforehand.
FHA mortgage lenders will evaluate collections and judgments on a case-by-case basis. In both instances (collections or judgments) the FHA mortgage applicant will have to explain the circumstances of the negative information on the credit report in writing.