Getting pre-approved for a mortgage can give you a sense of confidence and security when you are looking for a home. It means that a lender has reviewed your financial situation and credit history, and has agreed to lend you a certain amount of money for a mortgage. However, getting pre-approved does not guarantee that you will get the final approval for the mortgage. There are still some factors that can cause your mortgage application to be denied, even after you have been pre-approved. Here are some of the top reasons why pre-approved mortgages get denied, and what you can do to avoid them.
1. Change in income or employment status.
One of the most common reasons why pre-approved mortgages get denied is a change in your income or employment status. Lenders will verify your income and employment again before closing the deal, and if they find out that you have lost your job, changed employers, switched to a different type of income (such as commission or self-employment), or had a significant decrease in your income, they may revoke your pre-approval. To avoid this, try to maintain a stable and consistent income and employment until you close on your mortgage. If you do have a change in your income or employment status, inform your lender as soon as possible and provide them with updated documentation.
2. Change in credit score or history.
Another common reason why pre-approved mortgages get denied is a change in your credit score or history. Lenders will also check your credit again before closing the deal, and if they find out that you have missed payments, defaulted on loans, applied for new credit, or had any other negative changes in your credit report, they may revoke your pre-approval. To avoid this, try to maintain a good credit score and history until you close on your mortgage. If you do have a change in your credit score or history, inform your lender as soon as possible and explain the reasons behind it.
3. Change in property value or condition.
A third common reason why pre-approved mortgages get denied is a change in the property value or condition. Lenders will appraise the property that you want to buy before closing the deal, and if they find out that the property is worth less than what you agreed to pay for it, or that it has major defects or damages that affect its value or safety, they may revoke your pre-approval. To avoid this, try to negotiate a fair price for the property based on its current market value and condition. If you do have a change in the property value or condition, inform your lender as soon as possible and provide them with updated documentation.
4. Change in lender's policies or regulations.
A fourth common reason why pre-approved mortgages get denied is a change in the lender's policies or regulations. Lenders may change their lending criteria, interest rates, fees, or terms at any time due to market conditions, regulatory changes, or internal decisions. If these changes affect your eligibility or affordability for the mortgage that you were pre-approved for, they may revoke your pre-approval. To avoid this, try to lock in your interest rate and terms with your lender as soon as possible after getting pre-approved. If you do have a change in the lender's policies or regulations, inform your lender as soon as possible and ask them if they can honor your pre-approval.
5. Change in personal circumstances or preferences.
A fifth common reason why pre-approved mortgages get denied is a change in your personal circumstances or preferences. You may decide to buy a different property than the one that you were pre-approved for, or you may decide to back out of the deal altogether for personal reasons. If these changes affect your eligibility or affordability for the mortgage that you were pre-approved for, they may revoke your pre-approval. To avoid this, try to be clear and consistent about what kind of property you want to buy and why you want to buy it. If you do have a change in your personal circumstances or preferences, inform your lender as soon as possible and ask them if they can adjust your pre-approval accordingly.
Getting pre-approved for a mortgage can be a great way to start your home buying journey, but it does not guarantee that you will get the final approval for the mortgage. There are still some factors that can cause your mortgage application to be denied, even after you have been pre-approved. By being aware of these factors and taking steps to avoid them, you can increase your chances of getting approved for the mortgage that you want.