Mortgages Denied After Pre-Approval. Why?

It’s something you should do if you’re getting serious about buying a home.  Get pre-approved for a mortgage.  If you talk with lenders, you can figure out what size loan you will qualify for.   Once going through pre-approval, most people think they are good to go.  Once they find the home they want, they’ll just need to do the paper work and get the money to purchase your home.  However, sometimes the lender will decline the loan, even though the pre-approval went through.  It happens more than you think it would.  Here are a few reasons why.

  1.  There have been changes in the requirements for a loan. For example. they may have raised the credit score requirements for a loan.
  2. You take on additional debt. Even small changes in the amount of debt you have can make a difference.  If you’re in the process of buying a home, try not to take on additional debt.
  3. A Career Change. Employment status is a main criteria for approval.  The lender needs to know you’re going to be able to pay the mortgage.  For an FHA loan, you need consistent employment for at least two years.
  4. A Negative Hit on Your Credit. If you do something that affects your credit in a negative way, this can change your status.  For example, failing to pay your bills on time.
  5. Appraisal Issues. If you go to a lender that gives you pre-approval contingent on a bank appraisal, you may get in a situation where issues with the appraisal lead to a denial of the loan.  As an example, FHA mortgages have specific requirements regarding gas stations. If a home is too close to a gas station, you can’t get an FHA loan.
  6. Mortgage Fraud. The most common reason is when a borrower gives the lender falsified information at the time of their mortgage application.

There are some things you can do to help protect yourself from this.  Most importantly, educate yourself on how this process works.  An educated buyer will know not to take out any major debts, to pay all credit card bills on time and he or she will be aware of the requirements for the type of loan they are seeking, like an FHA mortgage.  Be diligent about your employment, finances and credit to ensure that you can get the mortgage you need for your new home.


(Source Bill Gassett. He is a nationally recognized Real Estate leader who has been helping people move in and out of the Metrowest Massachusetts area for the past twenty eight plus years. Bill works at RE/MAX Executive Realty, one of the largest RE/MAX firms in Massachusetts.  To read the full article go to )

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