Yes, medical debt can affect buying a house by lowering your credit score and raising lender concerns, but new federal rules are significantly reducing this impact by removing most medical collection debt from credit reports, making it easier to qualify for mortgages now. Major credit bureaus stopped reporting paid medical debt and collections under $500, and new rules ban reporting unpaid medical debt after a year, meaning it's less of a barrier, but paying it off is still best.
Medical bills do show on your credit, but they don't impact your ability to get a mortgage as much as people think they do. They are definitely taken with a grain of salt by lenders.
In June 2024, the CFPB finalized a rule to eliminate all medical debt from most credit reports and ban lenders from using medical debt collection information to make underwriting decisions.
A: FHA guidelines on medical collections exclude medical debt from your DTI ratio calculation. This means that even if you have unpaid medical bills, they won't count against your ability to qualify for a mortgage.
Lenders typically prefer to see a debt-to-income ratio smaller than 36%, with no more than 28% of that debt going towards servicing your mortgage. The lower the DTI; the less risky you are to lenders. There are two ways to lower your debt-to-income ratio: Reduce your monthly recurring debt.
How much debt can I have and still get a mortgage? This varies by lender and type of loan. Each lender has their own view on what is a good DTI. However, most lenders want your monthly debts to be 43% or less of your gross monthly income, which is your income before taxes.
Reasons for an FHA Rejection
There are three popular reasons – bad credit, high debt-to-income ratio, and overall insufficient money to cover the down payment and closing costs of a home.
Many individuals worry about losing their home to medical bills or Medicaid estate recovery. To prevent this, you can: Use a Life Estate Deed - Transfers property ownership while allowing you to live in your home. Place Your Home in an Irrevocable Trust - Prevents Medicaid from claiming it after death.
The rule removes a financial information exception for medical accounts and adds a restriction that forbids consumer reporting agencies from supplying medical account information to creditors when they determine a person's ability to take on new debt or expand existing obligations.
Medical debt can also lead people to avoid medical care, develop physical and mental health problems, and face adverse financial consequences like lawsuits, wage and bank account garnishment, home liens, and bankruptcy.
About the debt relief program
Public Health partnered with the non-profit organization Undue Medical Debt to implement the program. Residents started to receive letters to say their debt was canceled in May 2025 and, as of December 2, 2025, over $363 million of medical debt has been erased for over 171,000 residents.
The 3-7-3 Rule in mortgages isn't a loan type but a federal timeline from the TILA-RESPA Integrated Disclosure (TRID) rule, ensuring borrower protection by mandating disclosures within 3 business days of application, a 7-business-day wait between the initial Loan Estimate and closing, and another 3-day wait if significant changes (like APR) occur, giving borrowers time to review costs before committing to a loan.
You're disqualified as a first-time homebuyer if you've owned a home in the last three years, have a low credit score (usually <620), a high debt-to-income (DTI) ratio (over ~43%), unstable employment (less than 2 years steady), insufficient income, or if the property itself has major issues, while income limits for some programs can also disqualify high earners, with specific definitions varying by loan type (like FHA vs. Conventional).
Getting an 800 credit score in just 45 days is challenging, as significant scores usually take time, but you can make rapid progress by focusing on paying down credit card balances to lower utilization (under 30%, ideally under 10%), paying all bills on time, disputing errors on your credit report, and possibly becoming an authorized user on a trusted account, while avoiding new credit applications. The most impactful actions for quick changes involve reducing high balances and fixing mistakes, as payment history and utilization are key factors.
For an FHA loan, the minimum credit score is technically 500, but you need a 580 or higher for the lowest 3.5% down payment, while scores between 500-579 require a 10% down payment; however, many lenders impose their own higher minimums, often around 620 or more, due to "lender overlays".
The 2-2-2 credit rule is a guideline for building strong credit, suggesting you should have two active credit accounts (like cards or loans) for at least two years, with consistent on-time payments for those two years, often with a minimum credit limit of $2,000 per account, to demonstrate financial responsibility to lenders, especially for mortgages. It's a benchmark to show you can handle credit well over time, reducing lender risk and improving approval odds for major loans.