Can I Be Turned Down A Home Loan After Pre-Approval?

When it’s time to purchase a home, one of the first things you should do is get pre-approved for a home loan. In this highly competitive market, mortgage pre-approval is “the ace up your sleeve” because it emphasizes that you are serious about buying a home and have the finances to back you up. While …

Can I Be Turned Down For A mortgageWhen it’s time to purchase a home, one of the first things you should do is get pre-approved for a home loan. In this highly competitive market, mortgage pre-approval is “the ace up your sleeve” because it emphasizes that you are serious about buying a home and have the finances to back you up.

While having a pre-approval letter gives you an advantage at the negotiating table, it’s not a guarantee that you’ll close the loan.

That said, it may surprise you to learn that lenders may turn you down for a loan even if you get pre-approved. Let’s look at some of the reasons why this may happen and how to prevent it.

What Happens During the Pre-Approval Process?

The pre-approval process is quite similar to final approval, wherein lenders gather your financial documents and see where you are at. Based on all your documentation, a mortgage professional can tell you what size of the loan you are qualified for and the interest rate you may get. 

You can also receive an estimate of what your closing costs will be. The question is, why can you get denied even after pre-approval?

Possible Reasons You Can Get Denied By A Mortgage Lender Even After Pre-Approval

Significant changes can occur with your financial situation between pre-approval and closing. This is the main reason for getting turned downed after pre-approval. 

Lenders will go through all your financial documents once more as you approach closing day. If they discover that your creditworthiness or financial standing has changed significantly since pre-approval, they can use this as a basis for denying your loan.

Here are the top reasons why your loan can be in jeopardy even after pre-approval.

A Negative Hit on your Credit 

Credit reports pulled during pre-approval are usually good for 120 days. If you don’t close a loan within that time, lenders would need to pull a new credit report once more.

If you’ve been late on payments, closed any of your accounts, or have taken on new debt since pre-approval, your credit score can take a hit and cause a denial on your loan.

Increase in Debt

Lenders may check if you have incurred additional debt that may affect your DTI. For example, after pre-approval, buying a new car is not a good idea since the new loan can bump your DTI above the limit.

Change in Employment

Mortgage approval requires a history of stable and reliable employment. Changing jobs during the home buying process can impact your final loan approval.

There’s still hope, though! If you can prove that you have the same salary or higher or get a job within the same industry, you can still close the loan.

If you go from salaried to commission or completely change careers, lenders may have a hard time judging your future stability.

Tips That Help Ensure Your Loan Stays Approved Until Closing

Making financial changes can sabotage your pre-approval, so it’s better to know what you should do and not do between pre-approval and closing.

That said, the best thing you can do between pre-approval and closing is to keep things as they are from a financial standpoint.

  • Refrain from switching jobs
  • Don’t get new loans
  • Avoid things that can lower your assets or increase your debt

Do you need help in closing a home loan fast? Our loan officers can guide you on what steps to take to close quickly and with ease. Give our loan specialists a call or contact us through our website to learn more. We’re always here to help. 

Sign up for free class

It’s easy and free!


Related Posts

Loan Officer Moorpark
March 21, 2022

A home equity line of credit (HELOC) is a type of mortgage loan that acts similar to a credit card, except the line of available credit is tied to your home's equity. So instead of using funds advanced to you by a creditor, you use the cash from the value of your home. HELOC Benefits Lower Interest …

January 5, 2022

When you apply for a loan, your mortgage lender informs you of the maximum amount you can borrow, and this will help you get an idea of how much house you can afford. The question most buyers ask is how they reach this amount and what factors influence their decision? Read on to understand the …

Does Getting Preapproved For A Home Loan Matter?
January 3, 2022

An interest-only mortgage starts with payments that only pay down the mortgage interest. Generally, this makes your monthly payments lower than a typical mortgage payment. This option is attractive for those who cannot afford high mortgage payments. However, it has its drawbacks if you're not careful. Let's explore the benefits and disadvantages of interest-only mortgages. …

Can I Be Turned Down For A mortgage
December 28, 2021

Over 62 years of age who have substantial equity in their homes. With this loan, they can borrow against their equity and get access to cash to pay for any cost-of-living expenses they may have. Rates typically start at less than 3.5% per year, and the loan lasts until the borrower dies or moves from …

What Does It Mean To Cosign On A Mortgage?
December 15, 2021

In this article, we'll review what a home equity loan is as well as alternatives that also give you access to lump sums.  What is "Home Equity"? Equity is based on the difference between what's owed on the mortgage and the home's current worth. For example, if your mortgage is $150,000, but your home appraises …

What is DTI and How It Affects Your Mortgage Application
December 2, 2021

Have you been asked to cosign by someone looking to get a home loan approval? You may be wondering why they would ask or how this affects you. This article will help you to understand both of these points.  Why Were You Asked To Cosign?  These are the top reasons that home loan applicants seek …

Leave a Reply

Your email address will not be published.