Can you get an FHA loan with collections or charge-offs?

It can be possible. As of October 2026, HUD's FHA rules do not bar a lender from approving a buyer who has collection accounts or charge-offs. Approval depends on your whole file and your lender's own rules.

The key number is $2,000. If your collection balances add up to $2,000 or more, the lender must deal with them in one of three set ways. Charge-offs, which are debts the original creditor wrote off as a loss, do not need to be counted as debt at all.

FHA loans are home loans insured by the Federal Housing Administration and made by private lenders. The rules come from HUD, the federal housing agency that runs FHA. HUD's rulebook is Handbook 4000.1, last revised on August 12, 2026.

This guide covers each kind of bad debt and the Nevada spouse rule. It also shows two Las Vegas examples with the math, plus a quick check for your own numbers.

Can you get an FHA loan with collections or charge-offs?

It can be possible. HUD's FHA rules do not bar a loan because of collection accounts or charge-offs on your credit report. HUD also does not require every old debt to be paid before you buy. Your lender decides based on your whole file.

When FHA's automated system approves a file, HUD does not even ask for a written explanation of the bad accounts:

"The Mortgagee is not required to obtain an explanation of collection accounts, Charge Off Accounts, accounts with late payments, Judgments or other derogatory information."

HUD, FHA Single Family Housing Policy Handbook 4000.1, section II.A.4.b.iii(A), page 206, last revised 8/12/2026: https://www.hud.gov/sites/default/files/Housing/documents/40001-hsgh-Update-18.pdf

In HUD's rules, the mortgagee is your lender. The automated system is called TOTAL Scorecard. It reads your credit report and returns an approval recommendation, called an Accept, or a Refer. A Refer means a person called an underwriter must review the file by hand.

Collections are common. In February 2023, the Consumer Financial Protection Bureau reported that collection items on credit reports fell 33%, from 261 million in 2018 to 175 million in 2022.

How does FHA treat each kind of bad debt?

FHA treats each kind of bad debt by its own rule. This table puts them side by side for a file that TOTAL Scorecard approves.

FHA rules for collections, charge-offs and other bad debt

Your lender may ask for more than HUD's minimum. TOTAL Scorecard also weighs your whole credit report, so two buyers with the same collections can get different results.

What is FHA's $2,000 collection rule?

FHA's $2,000 collection rule is a dollar test on your total collection balances. If they add up to $2,000 or more, the lender must handle them one of three ways.

"If the credit reports used in the TOTAL Mortgage Scorecard analysis show cumulative outstanding collection account balances of $2,000 or greater, the Mortgagee must: verify that the debt is paid in full at the time of or prior to settlement using acceptable Sources of Funds (TOTAL); verify that the Borrower has made payment arrangements with the creditor and include the monthly payment in the Borrower's DTI; or if a payment arrangement is not available, calculate the monthly payment using 5 percent of the outstanding balance of each collection and include the monthly payment in the Borrower's DTI."

HUD, FHA Single Family Housing Policy Handbook 4000.1, section II.A.4.b.iv(M)(2), page 220, last revised 8/12/2026: https://www.hud.gov/sites/default/files/Housing/documents/40001-hsgh-Update-18.pdf

Settlement means closing. Cumulative means all your collection balances added together. So three collections of $800 each count as $2,400, even though none is over $2,000 alone.

In plain words, the three routes are:

• Pay in full. You pay the collections before or at closing. The money must come from a source the lender can document, such as your own savings.
• Payment plan. You set up a plan with the collector. The lender adds the monthly payment to your debts.
• The 5% method. If no plan is available, the lender adds 5% of each balance to your monthly debts. HUD says no documentation is required for this route.

Below $2,000 in total, none of those three steps is required by this rule. Your lender can still ask about any account, and its own policy may go further.

How does the 5% rule change your debt-to-income ratio?

The 5% rule adds a monthly payment to your debt-to-income ratio, even if you are not paying the collection. Every $1,000 of collection balance adds $50 a month.

Your debt-to-income ratio, or DTI, is your monthly debts divided by your monthly income before taxes. Lenders use it to judge how much house payment you can carry. Our guide to FHA debt-to-income limits in Nevada covers the limits that apply.

The example shows why the route matters. A plan with a payment below 5% of the balance leaves more room for the house payment. Paying a small account in full removes it from the math.

Valley West Mortgage also explains how lenders turn your monthly bills into a debt ratio on its main site.

Check your collections against FHA's rules

The FHA collections check below shows which FHA rule fits your numbers. It applies HUD's $2,000 test, the 5% method and the $1,000 dispute line. It does not approve anyone.

Do charge-offs count against you on an FHA loan?

Charge-offs do not count as debt on an FHA loan. HUD says the lender does not need to include them in your debts, whether the file is approved by the automated system or by an underwriter.

"Charge Off Accounts do not need to be included in the Borrower's liabilities or debt."

HUD, FHA Single Family Housing Policy Handbook 4000.1, section II.A.4.b.iv(N)(2), page 221, last revised 8/12/2026: https://www.hud.gov/sites/default/files/Housing/documents/40001-hsgh-Update-18.pdf

A charge-off is a debt the original creditor wrote off as a loss, usually after months of missed payments. It still shows on your credit report, and it can still lower your credit score. It just does not add a payment to your debt ratio.

One catch matters. A charged-off account is sometimes sold to a collection agency. If your report shows it as a collection account, it may count toward the $2,000 test as a collection. Read each account's status line on your report, and ask your lender how it treats an account that shows as both.

If the file goes to a manual review, the rules get stricter. The underwriter must decide why each collection and charge-off happened. HUD names three causes: disregard for your bills, trouble managing debt, or what HUD calls extenuating circumstances. You give a short written letter for each one, backed by papers.

The manual rules still use the same $2,000 collection test, and they still leave charge-offs and medical collections out of your debts.

Do medical collections count for an FHA loan?

Medical collections do not count as debt for an FHA loan. HUD lists medical collections among the obligations not considered debt, in both its automated and manual rules.

Fewer buyers carry them now. The three national credit bureaus changed their rules in 2022 and 2023, as the CFPB documented in March 2024:

• From July 1, 2022, unpaid medical bills wait one year, up from 180 days, before they can appear as collections.
• From the same date, paid medical collections no longer appear on credit reports.
• From April 1, 2023, unpaid medical collections under $500 no longer appear.

The CFPB found that by June 2023, only 5% of consumers with a credit record had a medical collection on it, down from about 14% in March 2022.

HUD lists medical collections as not considered debt, so no monthly amount is added for them. HUD's $2,000 collection test does not say whether medical balances belong in the $2,000 total. Keep them on a separate line and ask your loan officer how your lender counts them.

How does a disputed collection affect an FHA loan?

A disputed collection can send an FHA file to a manual review. HUD sets the line at $1,000 in disputed bad accounts.

"If the credit report utilized by TOTAL Mortgage Scorecard indicates that the Borrower has $1,000 or more collectively in Disputed Derogatory Credit Accounts, the Mortgage must be downgraded to a Refer and manually underwritten."

HUD, FHA Single Family Housing Policy Handbook 4000.1, section II.A.4.b.iii(B)(2), page 206, last revised 8/12/2026: https://www.hud.gov/sites/default/files/Housing/documents/40001-hsgh-Update-18.pdf

Derogatory means negative. HUD's disputed bad accounts are disputed collections, disputed charge-offs and disputed accounts with late payments in the last 24 months.

Two kinds are left out of the $1,000 total:

• Disputed medical accounts.
• Accounts from identity theft or unauthorized use. The lender needs a police report or papers from the creditor to leave these out.

A dispute on a zero balance, a current account, or late payments 24 months old or older does not count toward the $1,000. The lender still checks how the dispute affects your debts.

So a real error is worth disputing, but timing matters. If a dispute is still open when you apply, it can move your file from the automated approval to a person. The CFPB explains how to dispute an error on your credit report.

Do judgments have to be paid before an FHA loan closes?

Court judgments must be paid or resolved by closing on an FHA loan, with one exception. A judgment is a debt a court ordered you to pay.

HUD treats a judgment as resolved if all three of these are true:

• You have a valid agreement with the creditor to make regular payments.
• You have made at least three months of on-time payments under it. Paying ahead does not count toward the three months.
• The judgment will not rank ahead of the FHA mortgage on the home's title.

The monthly payment in the agreement goes into your debt ratio. If the judgment is a lien on the title, the lender needs a subordination agreement. That is a signed paper that puts the judgment behind the new mortgage.

Debt owed to the federal government is stricter. HUD bars lenders from processing an FHA loan for a borrower with late federal non-tax debt. One example is debt left from a past FHA loan. The debt must be resolved with the agency first. Lenders check a federal database called CAIVRS for it.

Do your spouse's collections count in Nevada?

Usually. In Nevada, a spouse's collections usually count toward the FHA $2,000 test, even if the spouse is not on the loan, unless state law excludes them. That is because Nevada is a community property state.

Community property means property bought during a marriage generally belongs to both spouses. Nevada law sets this out in NRS 123.220.

HUD's rule for these states says a non-borrowing spouse's collections must be included in the $2,000 total, unless state law excludes them. The same goes for the spouse's monthly debts in your debt ratio. A non-borrowing spouse's court judgments must also be resolved or paid in full, except obligations state law excludes.

HUD adds one protection. The spouse's credit history itself is not a reason to deny the loan. The lender still has to document the spouse's debts.

Should you pay off collections before you apply?

Not always, and the choice is yours. Whether to pay off collections before an FHA loan depends on your total, the 5% cost, the cash you need to close, and your lender's own rules.

Use this rule of thumb with your loan officer:

• Total under $2,000. HUD's collection rule asks for nothing extra, so that rule does not require you to pay them first. Your lender may still ask about them or set its own requirement, so ask before you spend cash on them.
• Total $2,000 or more, and the 5% amount fits your debt ratio. The lender can count the 5% instead of requiring a payoff.
• Total $2,000 or more, and the 5% amount squeezes your ratio. A payment plan with a lower monthly amount, or paying off one or two small accounts, can free up room.

Two cautions. First, money used to pay collections must come from a source your lender can document, so do not move cash around before you ask. Second, a payoff can happen at closing using a payoff statement from the collector, so you do not always need to pay before you apply.

Your credit score is a separate question from this rule. Paying a collection can change your score, and the effect depends on the scoring model and how the account is reported. So do not count on a payoff to raise it. Before you pay or sign a plan on an old debt, ask a housing counselor at an agency HUD approves, or a consumer-law attorney, how it could affect what you owe. Ask too about any time limit the collector has to sue.

FHA's minimum scores and down payment tiers are covered in our guide to FHA credit score requirements in Las Vegas.

What should a Las Vegas buyer with collections do first?

A Las Vegas buyer with collections should start an FHA loan by sorting every bad account on paper. The rest of the plan builds on that list.

1. Pull your credit reports from all three national credit bureaus.
2. Sort each bad account into collection, charge-off, medical, disputed or judgment.
3. Add up the collections and compare the total with $2,000. If you are married, add your spouse's.
4. Work out 5% of each balance and see how it changes your debt ratio in the check above.
5. Ask collectors about payment plans in writing if the 5% amount is too high.
6. Dispute any account that is wrong, which is your right. Tell your loan officer about any open dispute, because it can change how your file is reviewed.

Already near the score line? Our guide to an FHA loan with a 640 credit score shows what that score opens up. Buyers rebuilding after a lost home can read our guide to FHA waiting periods after a foreclosure or short sale. Carrying student loans? They are counted by their own rule, covered in our guide to FHA loans with student loans.

Once your accounts are sorted, plan the cash. Our FHA down payment guide explains the minimum. Nevada's Worker Advantage down payment assistance may help some buyers with that cash. For every other FHA rule in one place, see the complete Nevada FHA loan guide.

The bottom line

Collections and charge-offs do not rule out an FHA loan on their own. HUD sets a $2,000 test for collections and does not count charge-offs or medical collections as debt.

At $2,000 or more, you pay, set a plan, or the lender counts 5% of each balance. In Nevada, a spouse's collections usually count toward that total. Disputes of $1,000 or more send the file to a manual review.

Bring your credit reports and a list of every bad account to your first call. Then check how your collections count with a local loan officer.

Frequently asked questions