Can My Mortgage Be Declined After Pre-Approval?

A mortgage pre-approval happens before you have chosen a specific property.

Your mortgage broker or lender reviews information such as your income, employment, debts, credit, and available down payment to estimate the mortgage amount you may qualify for.

Once you have an accepted offer, the lender must complete a more detailed review. This includes confirming your supporting documents and deciding whether the property is acceptable as security for the mortgage.

You can learn more about the initial review in What Is a Mortgage Pre-Approval?.

A mortgage may be declined if something changes or if the final review uncovers information that was not available during the pre-approval.

Possible reasons may include:

• a change in your employment or income
• new debt, including a car loan, line of credit, or increased credit-card balances
• missed payments or a change in your credit history
• documents that do not support the income, down payment, or financial information used for the pre-approval
• changes to your available down payment or closing-cost funds
• the property not meeting the lender’s requirements
• an appraisal that does not support the purchase price
• changes to interest rates, qualification requirements, or the lender’s policies

The lender is approving both the borrower and the property.

After an offer is accepted, the lender may review the purchase contract, property type, location, condition, marketability, appraisal, and other details.

Some properties may require additional review. Examples could include leasehold properties, certain modular homes, unusual construction, very small units, properties needing substantial repairs, or homes in locations that do not fit a lender’s guidelines.

A strong financial application does not automatically mean that every property will be acceptable to every lender.

Yes. Your qualification is based on your financial circumstances at the time the lender completes its review.

Taking on additional debt can increase your monthly obligations and reduce the mortgage amount you qualify for. A job change, reduction in income, or change in employment type may also require the lender to reassess the application.

Even changes that seem unrelated to the home purchase may affect the mortgage. Before financing is complete, it is wise to speak with your mortgage broker before making a major purchase, opening new credit, changing jobs, or moving significant amounts of money.

You cannot remove every possibility of a change, but you can reduce avoidable risks while your mortgage is being finalized.

Try to:

• avoid taking on new loans or increasing credit-card balances
• continue making all payments on time
• speak with your mortgage broker before changing jobs
• keep your down payment and closing-cost funds available
• keep records showing where your down payment came from
• provide requested documents promptly and accurately
• discuss the property with your mortgage broker before removing a financing condition

Keeping your mortgage broker informed gives them an opportunity to review a change before it becomes a larger problem.

Your mortgage broker will submit the property and the supporting application documents to the lender for final review.

The lender may request updated income documents, bank statements, proof of down payment, confirmation of debts, property documents, or an appraisal.

The mortgage is not fully approved until the lender has completed its review and any approval conditions have been satisfied.

This is why a financing condition can be important. Your realtor, lawyer, and mortgage broker can help you understand the timing and responsibilities connected to your offer.