Reasons Why A Pre-Approved Mortgage May Be Denied
There are many things that can cause your pre-approved mortgage to be denied. We have compiled a few of the most prominent reasons in this blog. Keep reading to find them.
Source: Freepik
Got a dream car you are dying to buy? We all have our favorite goals and dreams in mind.
Like everyone, Alex had his favorite too – he wanted to own a Magnum SUV. He even had his mortgage pre-approved in principle. Alex breezed through the application to get his mortgage approved. It shocked him to know that the bank declined his pre-approved mortgage. Reason? He had accumulated multiple debts- college loans piled up on top of current loans.
Alex was in for an unpleasant surprise when he learned even a pre-approved mortgage does not guarantee mortgage approval! Strange right? Then what should you do to avoid making the same mistakes Alex did? This article will answer all your queries. Keep reading till the end.
How can a bank decline mortgage after pre-approval?
A lender can deny you a mortgage or a loan based on some factors.
1. Reduction in your Credit Score
When looking for a new loan, you cannot risk missing any payments. If you do so, your credit score will be negatively affected and can cause a denial for your new loan applications.
2. Taking too many debts of various kinds
Lending institutions do not prefer people who have multiple active loans. It creates doubt in their mind about your ability to pay back the money to the institution. So, to avoid such risks, they might reject your application.
3. Switching Jobs
Ensure you do not switch jobs while looking for a mortgage’s approval. Lending institutions consider this as a red flag since they are looking for a person with a consistent income source from one place. Preferably around two to three years.
4. Meet the contingencies
The appraisal process of the property should only convey that you meet all the mortgage contingencies well, or else the credit application will get denied by the lenders.
Advice on Getting a Mortgage Approval
The best approach to get approval for a line of credit is to keep your financial situation stable. Here are a few things to keep in mind.
1. Don’t take out any new loans or lines of credit. After the bank allows you the loan, you can apply for the following one.
2. Avoid making large payments; if you do not have sufficient documentation, this can cause lenders to become confused about where you are getting your money.
3. Avoid taking out a sizeable sum of money, as this may cause your lender to become suspicious.
4. Put money into a savings account regularly to contribute to your down payment.
Alex’s best line of action would have been to seek advice from a mortgage professional who may have cautioned him against taking the loan. We realize how frustrating it is to have your mortgage application declined. Keep a solid financial position where you can get a mortgage. If you want to read more articles like this, check out the list below.
