HUD's rule turns on the total of your collection balances (HUD 4000.1 II.A.4.b.iv(M)):
The Texas part: because Texas is a community property state, a non-borrowing spouse's collections are added to that $2,000 total on FHA unless state law excludes them. Your spouse doesn't have to be on the loan for this to apply.
Judgments are different. On FHA, a court judgment has to be paid or resolved by closing. It counts as resolved if you have a payment agreement with the creditor, you've made at least three months of on-time scheduled payments, and the judgment won't take priority over the new mortgage. In Texas, that applies to a non-borrowing spouse's judgments too (HUD 4000.1 II.A.4.b.iii(D)). Delinquent federal debt, like a defaulted federal student loan, makes you ineligible for FHA until it's resolved with the agency you owe (HUD 4000.1 II.A.1.b.ii(A)(10)).
For a one-unit home you'll live in, Fannie Mae doesn't require you to pay off collections or non-mortgage charge-offs, regardless of the amount (Fannie Mae B3-5.3-09). The rules tighten for other properties:
Medical collections are excluded from those limits. Open judgments and liens in the public records section have to be paid at or before closing. Freddie Mac has its own version of these rules.
VA looks at your overall credit picture and whether you can handle the debt. Identifiable medical collections can be disregarded. Other collections are weighed in that review, a judgment generally has to be paid or on a repayment plan, and in Texas a non-purchasing spouse's debts are included in the analysis (VA Pamphlet 26-7, Ch. 4).
Everything above is the agency rule, and it's the rule we use on FHA, conventional, VA and USDA loans. Some lenders add their own overlay, like requiring certain collections to be paid anyway. Down payment assistance programs may have their own credit standards. And an underwriter still reviews the whole file, so a recent collection with no explanation can matter more than an old one, even when the rule says it doesn't have to be paid.
Not before we talk. Paying an old collection doesn't always raise your score, and money you spend on it isn't available for your down payment or reserves. In some files, paying a specific account at closing is the right move. In others, it doesn't change anything. It's worth checking first.
This example is made up to show how the rules work.
Keisha is buying in Arlington with an FHA loan. She has a $900 collection from an old apartment. Her husband isn't on the loan, but he has a $1,500 collection. Because it's an FHA loan in Texas, the two are added together: $2,400, which is over $2,000. She chooses to pay off her own collection at closing, which brings the combined total below $2,000. If she'd gone conventional on the same one-unit home, neither collection would have had to be paid under Fannie Mae's rule. Underwriting still had to approve the rest of her file.
Don't pay off old collections before we talk. Let me look first, so your money goes where it actually helps. Book a call
Links checked Oct 19, 2026.
About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.
Equal Housing Opportunity.
Last reviewed: Oct 2026