Your Pre-Approved Mortgage Is Denied–What Happened?
If you’ve been shopping for a new home, you know that being pre-approved for a mortgage is one of the most important steps you can take to help ensure you’ll be able to buy the house you love. When you’re pre-approved for a mortgage, you’ll know what price range you’ll need to work within, allowing you to focus only on the properties you can afford. However, pre-approval doesn’t guarantee that your financing comes through when it’s time to close the deal. One of the most common reasons any real estate deal can fall apart is that the lender has a change of heart when it comes to signing on the dotted line. There are several reasons a lender can deny your mortgage, even if you’ve successfully completed the pre-approval process. If you look out for these issues while you’re in the process of buying a home, you’re less likely to hear the word “no” when you’re ready to buy. Employment Changes Once a pre-approval comes through, you may be tempted to take a new job or even start your own business. Our advice – give it some more time. A sudden change can derail your pre-approved mortgage very quickly. If you get an offer that is too good to refuse, look carefully at the circumstances before you agree. If you’re staying within your field, and going to another company in the same industry, you’ll likely be fine if your starting salary is equal to or more than the one you’re leaving behind. For example, if you’re an operations manager for a trucking company and decide to take a similar job with a competitor, it shouldn’t be a problem if you’ll be earning at least what you were bringing home when you were pre-approved. If this type of situation comes up, it’s best to check in with your lender before taking the position, just to make sure. However, changing fields, taking a cut in pay or deciding to quit your job to start your own business can torpedo your mortgage quickly. A Negative Hit on Your Credit Record Protect your credit score after your pre-approval by resisting big ticket purchases that can reduce your savings or available credit. It’s also important to make sure you don’t skip any regular payments or pay them after their due dates. Monitor your credit report regularly using one of the free services such as Credit Karma during your entire home buying process. If anything looks even a little fishy, investigate it immediately and do anything possible to reverse any negative effects. New Lines of Credit You may not think opening a new department store credit card to get an extra 10% off your purchase could affect your credit, but it might. The more money you’re allowed to owe, the less likely your lender will be to grant you a mortgage. Every penny that goes to anyone else is money that won’t go toward your mortgage. That said, don’t trade up with your car or decide you’d like to spend weekends on a new boat. Unusual Money Movement Lenders can be cautious when there are wild swings in your bank accounts. If you pull large amounts from your accounts, red flags go up everywhere. Report any reasons for large withdrawals to your lender immediately, and let them know if and when the amount will be reinstated to your account. You should also avoid making any large deposits into your account that do not have a documented paper trail to explain their appearance. Missing or Incorrect Documentation Be sure to submit all paperwork requested by your lender in a timely fashion, completely and accurately. If the documents needed to process your mortgage aren’t in order, the lender is likely to deny the loan. Running Short of Cash for Closing Lenders review your bank accounts carefully to make sure you have enough liquid assets to cover the full costs of closing, along with some extra to handle moving expenses and an emergency or two. These cash reserves aren’t required by all lenders, but it’s a great idea to have a little socked away just in case. The experts at Ernest Homes want to make sure you’re prepared for whatever comes down the line when you’re buying a home, including maintaining your pre-approved status with your lender. If you have any questions about the home buying process, give us a call at (912) 756-4135 or send us an email today!