Fourteen Ways to Get Your Mortgage Unapproved
Getting pre-approved for a mortgage is an exciting experience. You now have the go-ahead to shop around and find the perfect home. But with all the excitement, it is important to remember that you do not have the money in your hand just yet.
Some mistakes can be made that may jeopardize your mortgage approval. The last thing you want is to miss out on your dream home, so pay careful attention to the following tips to avoid getting your mortgage unapproved. Not only is getting a mortgage pre-approval revoked embarrassing, but it can also easily be avoided.
Having your mortgage approval get denied at the last minute is a highly stressful event that nobody wants to go through.
Keep in mind that not only can you get a pre-approval revoked by making these mistakes but also your final mortgage approval as well!
How to Avoid Getting Your Mortgage Unapproved
There are many ways buyers can get their mortgage pre-approval or final approval revoked before closing on a home. Here are the most common mistakes borrowers make after being pre-approved that need to be avoided at all costs!
1. Changing employment.
Getting a different job is common enough that you might not think anything of changing employment if a new, better opportunity presents itself. But after you are pre-approved for a mortgage, you want to avoid making any changes that could impact your loan.
Your pre-approval was based on your status at the time of application, and your employment status was a significant factor in the decision of the lender. When you go change jobs, you throw the whole equation in disarray.
If you have the opportunity for a better job speak to your mortgage broker about it. He or she may counsel you not to make any work change until the home has closed. Lenders like to see stability in employment. It’s possible if you are changing jobs, but into the same line of work, it won’t be a problem. Verify this is the case, however, before making any decisions!
2. Apply for other loans.
One of the most common ways people get their mortgage approval denied is taking on additional debt before closing on their home.
Now that you know you are going to get a home, it can be tempting to start shopping for all the things you will need to fill it. But applying for credit is another way you can mess up your mortgage pre-approval. The loan you were pre-approved for is based on not only your employment status but also on your credit status.
The lender plans on authorizing the mortgage loan because it believes your credit status indicates you can make your payments. If you take out other loans, like signing up for a credit account with your local furniture dealer, then you risk negatively impacting your credit status and missing out on your mortgage.
Buying a house is an exciting time where lots of people get anxious and want to go out shopping for their new place. Keeping your home spending in check is an absolute must so you don’t jeopardize your mortgage approval being denied.
One of the more common mortgage mistakes people make is buying a car while they are also purchasing a home. Many loan approvals have been revoked because of this mortgage blunder.
3. Making large deposits that you can’t document.
Before you get your mortgage loan the lender will want to see current records indicating the status of your accounts, including your savings accounts and checking accounts. If there is a significant deposit in any of these statements that do not match up with your average income, then it can throw off the loan.
Before you obtain any gifts from family or make any big sales, like selling a car, contact your mortgage lender and find out all the documents you will need to explain the large deposit. Many lenders will require a letter of explanation documenting the reason for the large deposit.
Lenders will be particularly careful to look over your last three years of spending habits.
4. Getting divorced.
If you applied for your mortgage with a spouse, the pre-approval you obtained is only going to work if you are still married when you buy your home. All of the calculations that made up the loan process were based on you and your spouse being together. Getting separated is one of the topics I talk about regarding selling a house when getting divorced.
If you get divorced, then everything changes. You can expect the lender to decline the mortgage, or at the best, the lender will authorize a loan substantially smaller than the one you were pre-approved for while married.
Related: Take a look at some great advice about purchasing a home after divorce. One of the most important takeaways is making sure your financial house is in order before going out and buying a home.
5. Forgetting to pay your credit cards.
Before the lender gives final authorization for the mortgage, it will go over all your information again to see what has changed. Your credit status will be scrutinized carefully, which means that any late credit card payments are going to show up and throw a red flag for the lender.
One late payment may not be enough to lose your mortgage – but it might. The way credit is calculated can be incredibly complex and beyond the scope of this article. It is best to be as cautious as you can and avoid doing anything that will negatively impact your credit.
Pay your credit card bills on time to avoid any potential problems. Your credit history makes up thirty-five percent of your credit score. It is the largest determining factor for credit scores.
6. Closing a credit card account.
You may be on a roll right now financially, and all your hard work has resulted in you paying off one or more credit cards. Paying off a card can be exhilarating, but don’t make the mistake of closing out the account before you get your mortgage. It may be counter-intuitive, but closing a credit card account can put a ding on your credit status.
One factor that improves your credit score is the length of time you have had an account open and in good standing. When you close the account, you erase the history of responsible credit use.
You also lessen your percentage of available credit, which can also negatively impact your status. So if you close a long-standing credit card account, it could lower your credit score.
7. Paying your rent late.
Your years of on-time rent payments show the lender that you are likely to pay your mortgage on time. If you get careless and fail to pay your rent when you should, the lender may decide that you are not as responsible as you seemed at pre-approval. The lender will look back over at least two years of rent payments.
The last thing you want to do is ruin your two-year history of on-time payments with a silly mistake so close to getting your mortgage.
Buyers need to be keenly aware of how not paying their obligations can come back and bit them in the ass.
8. Missing your last mortgage payment.
This may seem like an odd mortgage mistake, but it is certainly possible. Recently, I have a client who was purchasing a new home in Millbury Massachusetts. Their existing home needed to be sold before they could close on their new construction purchase. The closing on their current home took place in the early part of June. Their existing mortgage payment was due at the end of May. Unfortunately, they did not make their last mortgage payment thinking it wasn’t a problem given the fact they were closing in little over a week.
It turned out to be a major problem, as Bank of America, looked at it as a late mortgage payment. The buyer was not able to qualify for the loan on the new home, and their mortgage approval was taken away! This caused a major hassle as the buyer could not close on their new construction purchase. They had to go out and procure different financing from another lender. The credit hit also forced them to go away from a conventional mortgage into an FHA mortgage.
9. Settling old collection accounts.
Old collection accounts are another area where home buyers can make a mistake without realizing they are doing so. You would think that paying off old debts would be a good thing, but your credit score may be hurt if you pay off old collection accounts right before you get your mortgage.
The pre-approval process already factored in your old collection accounts, so there is not benefit to paying them to offer right now. In fact, paying them off could cause your credit score to drop for a short period – just long enough to mess up your mortgage.
10. Spending your savings.
When you tell a lender that you have a certain amount of savings at your disposal, you are expected to have that money still when you get your mortgage.
It is easy to spend your savings in the time leading up to the home purchase, but you want to avoid doing so. If you cannot verify that you still have the savings listed in your initial loan pre-approval, you risk being denied by the lender.
As mentioned previously, you need to be frugal with your funds before closing on the home. After the closing on the home, you will be safe from your pre-approval being taken away, but that doesn’t mean you should be any less fiscally responsible.
11. Getting in legal trouble.
If you are involved in a lawsuit between the time you are pre-approved and the time you need the mortgage money, you could lose your loan. If the lawsuit doesn’t go your way, there is a chance your wages could be garnished; you could be subject to fines or lose a substantial amount of income. None of those things looks good to a lender.
If you find yourself in a lawsuit make sure you inform your lender, so your mortgage approval does not get denied.
12. Picking the wrong home to buy.
Did you know it is possible to buy the wrong home? It’s true! There are some properties where your pre-approval will become void because they do not meet lender guidelines as mortgage broker, Luke Skar points out. It is important to check on the qualifications of the home you are buying depending on what type of loan you’re getting. There are some types of financing you can get including:
- Fannie Mae or Freddie Mac backed loans
- FHA financing.
- USDA financing.
- VA funding.
Each of these loan types will have certain restrictions when it comes to the home you are purchasing. Luke does an excellent job summarizing some of the common stumbling blocks with getting a mortgage on each of these loan types.
Make sure that you are not purchasing a home with financing that will not work! Some people pick certain loans because they want to avoid paying private mortgage insurance. That’s great but not if the loan program is not the right fit for the property you are purchasing.
13. Appraisal Issues.
Appraisal problems are a bit different that these other 12 ways to get your mortgage approval taken away. These other reasons are mostly in your control while getting the home you are buying to appraise is not. It’s possible you could run into an appraiser that feels you are overpaying for the home you’re purchasing.
In cases like these, the owner or their real estate agent will more than likely fight the low appraisal amount. There is no guarantee, however, that they will be successful. You may find the terms of your sale need to be changed to keep your loan approval.
Committing fraud on a mortgage loan application is not a smart thing to do. Doing so, of course, will more than likely result in your mortgage approval being taken away.
Lenders today are more careful than ever when it comes to lending money. They all scrutinize the information given to them by borrowers very thoroughly. Thinking you will put one past a mortgage company today is unlikely.
Each of these fourteen things can cause your final mortgage approval to be taken away. Avoid these common mortgage mistakes, and you will have nothing to worry about. If you have made one of these errors, it’s important to get in touch with your mortgage representative right away and let them know.
Additional Helpful Mortgage Resources
- Where to get a loan when your mortgage is denied via Nu Wire Investor.
- Mortgage mistakes to Avoid via Kyle Hiscock at Scoop.it.
- How to get the best loan terms via Maximum Real Estate Exposure.
- Helpful home buying advice via Lynn Pineda.
- Types of people who should not buy a home via Conor MacEvilly.
Use these additional resources to make sound financial decisions when purchasing a home.
About the Author: The above Real Estate information on the ways to get your mortgage preapproval revoked was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at [email protected] or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 30+ Years.
Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!
I service Real Estate sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton and Uxbridge MA.