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How to make your collections not stop you from buying your next Minnesota home

How to make your collections not stop you from buying your next Minnesota home

When I look at two of the easiest home loans that I’m seeing people in Minnesota apply for and why they are getting denied it’s late payments and very late payments (collections) that are stopping them from buying a home of their dreams, or buying an investment property for cash flow that will allow them to slowly move out of the rate race.

Let’s discuss two popular programs here and why dealing with collections may even beat out the third popular loan option when considering all options when applying for a home loan here in Minnesota.

The first program is the VA home loan program that offers 100%, now that’s easy. Sure you’ll have the cost of an appraisal and inspection, but that’s less money than rent, deposit or a big option payment on a rent to own.

Do you have a DD214 form?

Have you served in any of the following:

-Air Force

-National Guard




We have seen people buy their dream home and get approved even with credit scores in the 400’s, yes you read that right. Message me with any credit score, but under 500 will need a good letter of explanation on how you got there.

An unforeseen health issue may be a good backstory that the lender may hear. If you have recent collections or 60+ day lates then it’s going to be tougher to get you this VA loan.

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Now if we can have you work with a credit expert for a few months to establish an on-time payment history then that may satisfy the lender to help you with a pre-approval.

Another popular program is the USDA 100% financing program. Only a 550+ credit score,

BUT it WILL require having NO collections or for you to PAY off your past collections to get approved

(Excluding medical collections).

USDA Minnesota home loan program when buying

The USDA program is for living just outside the Twin Cities like:

Buffalo, Big Lake, Monticello, Zimmerman, Delano, Isanti, Cambridge, North Branch, Lidstrom, Annandale, Stacy, North of East Bethel, West of Mound, South of Lakeville.

This is a very good example of where your collections hold you back from owning your very own home.

Now the third very popular option is FHA where we see a 580+ credit score with 3.5% as a minimum to apply.

There are known to be grants and fowl payment programs available from time to time.

Not everyone has an extra $10,000+ to come up with for a down payment for a home purchase, so it may be easier to actually pay off collections for much less than the $10,000 in savings.

In many cases paying off collections can lower your credit score, but in many cases paying off collections with the 100% USDA program is easier for many. Just be prepared to buy in those USDA qualifying cities.

So as you can see above your late payments and collections are often hurdles that are in the way of you buying a dream home, so keep your payments current, auto loans, credit cards, everything by habits.

To learn more about home loan programs please click motivated buyer link on my website and message me and I’ll connect you with a licensed mortgage person.


Learn about the Minnesota program for contract for deed, no bank qualifying

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