Home Purchase Mortgage Calculators
Mortgage Program Calculators
A mortgage pre-approval is preliminary and subject to change if a borrower's employment, credit or financial profile changes before he or she submits a loan application. For example, a change in your monthly gross income and debt or credit score may disqualify you for a mortgage. This is also the case after you submit your mortgage application until when your mortgage closes. For example, if you take out a new loan to buy a car after you apply for a mortgage but before your mortgage closes, your increased debt payments may mean you no longer qualify for the mortgage.
In your case, adding the student loan payments to your monthly debt payments increases your debt-to-income ratio which makes it more challenging to qualify for a mortgage. For example, the maximum debt-to-income ratio for most mortgage programs is typically 50% and you may be required to reduce your mortgage amount or you may not be able to qualify for a mortgage if your debt-to-income ratio is greater than 50%. Student loan monthly payments are almost always included in a borrower's debt-to-income ratio as long as the borrower is required to make the payments and not on an income-driven repayment plan that eliminates the monthly payment. We provide a comprehensive overview of student loans and the mortgage process on FREEandCLEAR that outlines how student loans impact your ability to qualify for a mortgage. Hopefully your income has increased to offset the new student loan payments.
To answer your question about a drop in your credit score, while a decline in your score is not positive, if the decline is relatively small it should not adversely impact your ability to qualify for a mortgage. The minimum credit score required for a conventional loan is typically 620 and the minimum credit score required for an FHA Mortgage is 580, or as low as 500 if you make a down payment of at least 10%. Plus you have the opportunity to improve your credit score before you apply for the mortgage.
In short, a lot can happen in between when you receive a mortgage pre-approval and when you apply for your mortgage and also in between when you apply for your mortgage and when your mortgage closes. When it comes to getting a mortgage, nothing is final until you receive final lender approval and your loan funds.