A pre-approved mortgage loan sounds like a sure bet, doesn’t it? Once your mortgage lender certifies your loan limit, you can start shopping for your dream home.
But there’s a catch: Just because you’ve been pre-approved for a loan doesn’t mean it’s guaranteed.
There are several reasons why lenders can reject your pre-approved loan, including:
Credit score changes
Incorrect information on loan application
New negative information on loan application
Let’s explore these perils of pre-approval and how to avoid them.
Credit Score Changes
One of the biggest reasons your mortgage loan can be denied after pre-approval is if your credit score changes.
During pre-approval, lenders evaluate your credit score to determine your mortgage loan limit. They also examine your loan score to note any changes that contradict the loan conditions.
For example, a lender can deny your loan if you’ve been pre-approved for a mortgage loan with a credit score of 700, which drops to 680 due to late credit card payments.
Another reason your mortgage lender can reject your pre-approval is due to changes in your income.
Mortgage providers evaluate your income during the pre-approval process. However, they can deny your loan if your income decreases before you apply.
Say you’ve received a pre-approval for a mortgage loan with a salary of $100,000 per year, but your salary drops to $80,000 before applying. This decrease can result in a loan denial.
Mortgage lenders use your employment status during the pre-approval process to determine your eligibility for a loan. However, they can reject your loan if you switch jobs before applying for it, especially if it’s a new and unstable posting.
Suppose you applied for a mortgage pre-approval while working at a well-established organisation but switched to working at a startup before the loan application. In that case, your lender will deem you unsuitable.
Incorrect Information on Loan Application
False or inaccurate information about your income, employment status, or assets can prevent you from getting a loan. You should always be transparent and honest when filling out your loan application, lest your mortgage lender bans you from receiving your loan.
Exaggerating your income is a common example of false information. While it might raise your loan limit, your mortgage lender will always investigate the details on your application to confirm your eligibility. Once they discover you lied, they’ll automatically reject your loan application.
New Negative Information During Loan Application
If your mortgage lender discovers you took on new debts or liabilities during your loan approval process, they can reject your application. New information about your desired property, such as zoning issues or structural problems, can also result in a loan denial.
Get Your Dream Home Today
To protect yourself from loan denials, you must maintain a good credit score, avoid big changes in your income or employment, provide accurate information on your application, and look out for new negative information during the loan approval process. Remember that a loan pre-approval isn’t a guarantee, and you must maintain a stable financial status to get your dream home.