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Top reasons pre-approved mortgages get denied

11/23/2023
Top reasons pre-approved mortgages get denied



You might think that getting pre-approved for a mortgage means you are guaranteed to get a loan. However, that is not always the case. There are many reasons why a pre-approved mortgage can get denied, and some of them are avoidable. Here are some of the most common ones:

 

Your credit score changes.

Lenders check your credit score when you apply for pre-approval, but they also check it again before closing the deal. If your score drops significantly, they might reconsider your eligibility or offer you a higher interest rate.

 

You change jobs or income.

Lenders want to see that you have a stable and reliable source of income. If you switch jobs, lose your job, or have a decrease in income, they might question your ability to repay the loan.

 

You take on new debt.

Lenders also look at your debt-to-income ratio, which is the percentage of your monthly income that goes towards paying your debts. If you take on new debt, such as a car loan, a personal loan, or a credit card balance, you might exceed the lender's threshold and jeopardize your approval.

 

You make a large purchase or withdrawal.

Lenders want to see that you have enough money for the down payment and closing costs. If you make a large purchase or withdrawal from your bank account, they might suspect that you are using borrowed money or have insufficient funds.

 

The property appraisal comes in low.

Lenders use an appraisal to determine the value of the property you want to buy. If the appraisal comes in lower than the agreed price, the lender might not lend you the full amount or require you to pay the difference in cash.

 

The property inspection reveals major issues.

Lenders want to make sure that the property is in good condition and meets their standards. If the inspection reveals major issues, such as structural damage, mold, termites, or code violations, the lender might ask you to fix them before closing or back out of the deal.

These are some of the top reasons why pre-approved mortgages get denied, but there are others as well. To avoid them, you should maintain your credit score, income, and debt level, avoid making large purchases or withdrawals, and be prepared for the appraisal and inspection process. By doing so, you can increase your chances of getting approved and securing your dream home.

 


 

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