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June 1, 2017
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Denied a Mortgage after Pre-Approval?

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Can I be denied a mortgage after I have been pre-approved?

A great way to determine how much you are qualified to borrow when house hunting is to go through the mortgage pre-approval process. During the preapproval process your lender will take into account several factors such as your credit score, debts, assets and income. You will get a pre-approval amount based on the numbers from these groups. These numbers need to stay pretty steady until the closing of the home in order to receive the loan. If these numbers change for the worse you could be denied the loan. Here are some examples of why the final loan amount could be denied and tips to prevent that from happening.

Debt level

Your debt level has a lot to do with how much you could be qualified for in the pre-approval process. If for any reason your debt rises significantly before the closing of the loan your lender could have an issue. This could change your debt ratio and make you ineligible for the loan. It’s best to not accumulate any additional¬†debts while waiting for final loan approval.

Income

If you’ve been preapproved for your loan then you most likely have a steady income. If this changes in any way such as you or your spouse losing their job or having a decrease in salary this will also affect your debt ratio and your ability to pay the loan. You could be denied the loan if your lender finds out about your lowered salary.

Loan requirements

When you were preapproved for your loan there were certain requirements that you had to meet as far as credit score numbers and salary. Without your input or prior knowledge the loan company could decide to change the loan requirements. If you do not meet the new requirements and the company has decided not to retroactively include those who have already been preapproved you could be denied the mortgage. This is uncommon but is one of those cases where it is really out of your control. It’s best to stick with a reputable company that will not change the loan requirements during the loan process.

Credit report

Your credit report has a lot to do with your ability to pay the loan back if you’ve been preapproved but later, before the loan is finalized, something shows up on your credit report that is negative and lowers your credit score you could be denied the mortgage. It’s best to keep all types of spending at bay and to be upfront about all possible debts when going through the preapproval process.

Assets

You may have been pre-approved based on your specific assets such as home ownership, cars and financial assets. You should hold onto these assets until you receive final approval.

Pre-approval for a mortgage is a great way of determining how much you are qualified to borrow. The final approval does not come until the day of the closing of the home. Prevent getting denied a mortgage and don’t spend unnecessarily or try any risky financial moves during this time. Your mortgage broker will also tell you NOT to request additional lines of credit. If you follow these tips you will have final approval with no problem and be able to buy the home of your dreams. For all of your mortgage and lending needs call the experts at Florida Real Estate Lending.

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