Can Unpaid Medical Bills Stop a Mortgage Loan?

Even small medical bills can add up to major credit trouble.
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Unpaid medical bills represent a serious problem in the United States. According to a 2011 USA Today analysis, uninsured Americans generate up to $49 billion in unpaid hospital bills yearly. Further, uninsured families pay an average of just 12 percent of their hospital bills in full. With statistics like these, it's no surprise that medical bills might be a concern for those seeking mortgages. The news, however, is not favorable. Unpaid medical bills can interfere with qualifying for a mortgage.

Credit Rating

Any bill that lowers your credit rating renders you more of a risk to lenders and makes it harder to obtain a loan. However, each lender has its own criteria for approving loans. Some might approve borrowers with lower credit ratings but charge higher interest rates and fees and set more unattractive loan terms. If the unpaid medical bills pull your credit rating below the threshold for a lender, it might deny your loan application outright.

Collections Accounts

A recent unpaid medical bill might not affect your credit report. In such a case, it is unlikely that it will impair your ability to obtain a loan. Bills that exceed 90 days overdue, however, may be turned over to a medical provider's collections department or referred to a collections agency. Once the bills are labeled as collections accounts, there's a good chance they will be reported to the credit bureaus. Once reported, they can remain on your credit report for seven years.

Debt Versus Income

Mortgage lenders typically consider each applicant's debt-to-income ratio when deciding whether to grant loans. If medical bills raise your debts too high and contribute to an unfavorable debt-to-income ratio, you may find it harder to get a mortgage. According to Bankrate, your debts, including your mortgage and homeowner's insurance, should equal no more than 36 percent of your income. You can calculate 36 percent of your monthly income by multiplying your yearly income by .36 and then dividing this number by 12 months. Then add up all of your monthly debt payments, including your medical bills, credit card bills, and projected mortgage and homeowner's insurance payments. If this amount exceeds 36 percent of your monthly income, you may have a hard time getting a loan.


To have the best chance of securing a mortgage loan, pay your medical bills before they reach collections. If you've already racked up overdue bills, pay them in full or negotiate a settlement with the creditors. Check that any negative accounts on your credit report get marked paid or settled. Making payment arrangements for past-due bills might not prove as advantageous, as the payments will contribute to your monthly debt total and might make securing a loan harder.


Your credit report can suffer a hit not just from legitimate bills but also from mistakes on your credit report. For example, if a bill makes it to your credit report while you wait for your insurance company to pay it, it could lower your credit score despite the fact that you weren't responsible for it. Likewise, paid bills sometimes remain as negative entries, and erroneous amounts might show up on your credit report. Review your credit report before you begin the mortgage application process and ask the credit bureaus to investigate incorrect entries.

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