Getting pre-approved is the first step in your homebuying process. However, even with prior approval, a mortgage can be denied if there are changes in your credit history or financial situation. Working with buyers, we know how heartbreaking it can be to learn that your mortgage has been denied days before closing. Another very common reason why a mortgage is denied after prior approval is because the buyer takes on additional debt.
Ask any experienced real estate agent if you've ever had a situation where your buyer applies for a loan to buy a new car after they've accepted the offer of a home. The probability that the real estate agent has is quite high. That's why I recommend that all homebuyers get pre-approved before buying a home. It's a quick and easy process with lots of benefits.
However, prior approval is not a guarantee. Therefore, you may be denied a mortgage even after you have received prior approval. Why? Because the lender will recheck many of those financial requirements when closing day approaches. When a lender decides to give you pre-approval for the mortgage, it does so taking into account your credit rating.
Most mortgage lenders have minimum credit rating requirements for home loans. If your credit score falls below that number, they can deny approval for the mortgage. When your home is inspected and a major problem arises, you may be denied the mortgage loan. Lenders often deny your loan if they consider the home to be a bad investment during the appraisal process.
While it's not a good feeling to be denied the loan, it could be the best-case scenario: you don't want to buy a house full of problems that need to be solved.
