Guideline answers · Fannie Mae
Fannie Mae · Credit
Do collections and charge-offs have to be paid off on a Fannie Mae DU loan?
Not on a one-unit principal residence, whatever the amount. On a two- to four-unit owner-occupied home or a second home they must be paid if they total more than $5,000; on an investment property, any account of $250 or more and all accounts totaling more than $1,000 must be paid. Medical collections are excluded.
Checked against the sources below on October 29, 2026. Reviewed by Chris Black, NMLS 275073, on November 2, 2026.
The rules
- Past-due accounts that are not in collection must be brought current.
- Medical collections are excluded from the limits and never have to be paid at or before closing.
- One-unit principal residence: no payoff of collections or non-mortgage charge-offs is required, regardless of the amount.
- Two- to four-unit owner-occupied or second home: pay in full at or before closing when they total more than $5,000.
- Investment property: pay any single account of $250 or more, and pay accounts that total more than $1,000.
- Marking an account Paid By Close in the application makes DU issue a message that it must be paid.
Watch for
- These are the DU rules. Manually underwritten loans follow a different section, not covered here.
- Lenders often overlay collection payoffs. A mortgage charge-off is a significant derogatory event with waiting periods (B3-5.3-07), not this rule.
Sources
Fannie Mae Selling Guide, B3-5.3-09 DU Credit Report Analysis
For two- to four-unit owner-occupied and second home properties, collections and non-mortgage charge-offs totaling more than $5,000 must be paid in full prior to or at closing.
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