Credit Score drop after Qualifying? What Happens?

[firemartinez1980]

When you apply for a Mortgage,  your credit is pulled and basically your approved off of your credit score.....So let's say you have a 620 when you apply. You find a house, put an offer in, paperwork is all started, but before closing, your credit drops 30-40pts for whatever reason..

Are you then denied the loan? 

Does everything keep moving forward since you already qualified?

Any advice??

[CreditInspired]

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@firemartinez1980 wrote:

When you apply for a Mortgage,  your credit is pulled and basically your approved off of your credit score.....So let's say you have a 620 when you apply. You find a house, put an offer in, paperwork is all started, but before closing, your credit drops 30-40pts for whatever reason..

Are you then denied the loan? 

Does everything keep moving forward since you already qualified?

Any advice??

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If one's score dropped 30-40 points, that's a huge problem! It means something negative has been added to the CR. So before moving forward, that negative has to be corrected so that the score goes back to what you were approved at.

[firemartinez1980]

Well that was an "Example".....

Reason I am asking is because I needed a new vehicle, so I purchased a Truck last week. My credit score was right at 570 and I also would like to get a VA Loan soon.

The new vehicle is the only debt I now have and I just paid off 2 credit cards and also a car loan, but my credit hasn't updated yet.

[CreditInspired]

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@firemartinez1980 wrote:

Well that was an "Example".....

Reason I am asking is because I needed a new vehicle, so I purchased a Truck last week. My credit score was right at 570 and I also would like to get a VA Loan soon.

The new vehicle is the only debt I now have and I just paid off 2 credit cards and also a car loan, but my credit hasn't updated yet.

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Ugh, that's a no-no. Lenders do not want to see any new loans, accounts, or CCs 12 months prior to applying for a mortgage. 

[firemartinez1980]

That makes NO sense, especially when the Mortgage payment for the house's around me would be about $400 less than what I am paying for Rent currently. So it's not like the payments wont be made

[Anonymous]

Yes your loan can/will be denied for drops in scores. It happens all the time, people go out and buy furniture, cars , collections added. I would recommend improving your score to 620 then apply as it opens up your lender options. 580 is the bare minimum overlay for va I believe.

[Kforce]

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@firemartinez1980 wrote:

That makes NO sense

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Fico scores, auto loans, mortgages and other banking practices are not required to make sense and usually don't.  They are what they are !  Not a recommended move, however everything might still workout.  Most here would have said to borrow or rent a car until after loan closing.

Do nothing that might change your scores

[MauiMan85297]

If the auto reports before you close it would certainly bring your mortgage scores down, it's an installment loan with a brand new outstanding balance and that WILL affect mortgage scores.

[Anonymous]

If your score drops below the lenders minimum score you will most likely be denied. Your best option is to work with a lender who can assist you down to a lower score. I save loans with similar situations with credit scores down to a 550 so I'm sure it can be done. If you have already had an appraisal complete the good thing is the new lender will just need to verify income, rental history, and get documents signed by you. I have seen loans like this close in as little as 10 days.

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[JVille]

I am so sorry. You may well need to wait 4 to 6 months to work on your credit score. Until the new vehicle (credit line) updates into your CR their is no way to know the full result of this action but it’s likely to be significant. Unfortunately FICO scores are a major factor in approving any mortgage.
Time will tell how this affects your scores.

My question would be what is holding your scores down? And what can be done to improve your scores.