✅ Mortgage Pre-Qualification Calculator

Minimum scores by loan type:

• FHA: 580 minimum (3.5% down), 500-579 requires 10% down
• Conventional: 620 minimum, but 740+ gets best rates
• VA: No official minimum, but most lenders want 620+
• USDA: 640 minimum for automated approval

Credit score impact on rates (on $300K loan):

• 760+: 6.25% = $1,847/month
• 700-759: 6.75% = $1,946/month (costs $99/mo more)
• 660-699: 7.25% = $2,047/month (costs $200/mo more)
• 620-659: 8.00% = $2,201/month (costs $354/mo more)

Action items: If below 740, spend 3-6 months improving before buying. Pay off collections, reduce credit card balances to under 30%, dispute credit report errors.

Quick calculation using 28/43 rule:

On a $400K house with 20% down ($80K), your loan is $320K. At 7% interest:

• Monthly P&I: $2,129
• Property tax (1.2%): $400/mo
• Insurance: $150/mo
• Total housing payment: $2,679/mo

Income needed: $2,679 ÷ 0.28 = $9,568/month = $115,000/year

If you have existing debts:

• $500/mo car payment = need $107K/year income
• $300/mo student loans = need $110K/year income
• Both = need $125K/year income

With FHA (3.5% down): Need about $100K/year due to higher interest and PMI

Debts that COUNT toward DTI:

• Mortgage or rent payments
• Auto loan/lease payments
• Student loan payments (even if deferred)
• Credit card minimum payments
• Personal loans
• Home equity loans/HELOCs
• Alimony or child support paid
• Other mortgage/rental property payments

Debts that DON'T COUNT:

• Utilities (electric, water, gas)
• Phone bills
• Car insurance
• Health insurance
• Groceries and food
• Subscription services (Netflix, gym)
• 401(k) contributions

Special cases:

• Student loans in deferment: Lender uses 0.5-1% of balance as monthly payment
• Business credit cards: Only counts if personally guaranteed
• Authorized user on someone else's card: Usually doesn't count if you can prove you don't pay it

Yes, but it's complicated:

Both on the loan (recommended if both have decent credit):

• Combine both incomes for higher buying power
• Lender uses lower of the two credit scores for rate
• Both people's debts count in DTI

Only one person on loan (if one has bad credit):

• Only that person's income counts
• Only that person's credit score matters
• But spouse's debts still count in DTI (in community property states)

Example scenario:

Person A: 780 credit, $80K income, $200/mo debts
Person B: 620 credit, $60K income, $800/mo debts

Option 1 - Both on loan: $140K combined income, but 620 credit = 8% rate
Option 2 - Only A on loan: $80K income, 780 credit = 6.5% rate

Often better to use just the high-credit spouse, then refinance later to add the other person after improving their credit.

Immediate actions (this week):

• Pay off small debts: Paying off a $200/mo debt can increase buying power by $40K-50K
• Pay down credit cards below 30%: Can boost score 20-50 points in 30 days
• Become authorized user: On parent's old card with perfect history (adds to your credit age)
• Don't apply for new credit: Each application drops score 5-10 points

Short-term improvements (1-3 months):

• Pay off collections: Boost score 30-50 points
• Dispute credit errors: 30% of reports have errors
• Pay down cards to $0: Maximum score boost
• Set up auto-pay: Ensure no late payments

Example impact:

Starting: $70K income, $700/mo debts, 680 credit = Qualify for $280K home

After improvements: $70K income, $300/mo debts, 740 credit = Qualify for $350K home

Gained $70K in buying power!

Pre-Qualification (soft check):

• Time: 10-15 minutes online
• Documents: None required
• Credit impact: None (no credit pull)
• Accuracy: Rough estimate only
• Use: Personal planning, deciding if you're ready
• Seller value: No weight at all

Pre-Approval (hard check):

• Time: 1-3 days for full approval
• Documents: W-2s, pay stubs, bank statements, tax returns
• Credit impact: Yes (hard pull, drops score 5-10 points temporarily)
• Accuracy: Exact loan amount you can get
• Use: Required for house hunting, making offers
• Seller value: Strong - shows you're a serious, qualified buyer

When to get each:

1. Pre-qualify first (now) - See if homebuying is realistic
2. Improve finances (1-6 months) - Based on pre-qual results
3. Pre-approve (when ready to shop) - Get pre-approval 60-90 days before house hunting
4. Make offers - Include pre-approval letter with every offer

Pro tip: Get pre-approved by 2-3 lenders to compare rates, then choose the best one.