Real estate home buyers: Do you worry about being denied?
• Pre-qualified does not mean pre-approved.
• Changes in your credit score affect your pre-approval status.
• Taking on new debt can negatively impact your chances to obtain a mortgage.
It’s a terrible feeling to be rejected. Your heart capsizes inside your chest. Sweat creeps up around your hairline, your palms get clammy as the dreaded words float like fat black clouds through your ears.
It happens to all of us at one point or another in life, but being rejected is never something we get used to experiencing. Fortunately, the more knowledge you have, the higher your chances are of being approved. In order to know what kind of home you are eligible to buy, you need to know your price range. The type of lender you choose will determine the amount you can spend. Make sure you shop around with a few different lenders to get the best deal.
Real estate home buyers are stunned all the time when they find out their pre-approval loan status has been later denied by a lender. Do NOT let this happen to you. Ensure that everything is taken care of upfront by learning why buyers are rejected even when they were previously pre-approved.
1. Lender voids pre-approval if your financial profile changes.
Just because you were pre-approved, that doesn’t mean you can go out and take on more debt. They have every right to refuse their prior offer if your financial profile changes from what it was when you first applied.
2. You take on more debt.
Your application is pre-approved based your current status at the time of the process. The smallest changes with your credit score can knock you out of being approved for the loan. Taking on more debt is a great way to change your credit score and affecting your loan eligibility.
3. You switch jobs.
Your lender wants to know you are a dependable risk. Switching careers can be perceived as a higher risk because it could create doubt that you would be able to make consistent payments. Changing jobs between pre-approval and purchasing your home can have a negative effect on getting that loan.
4. A negative credit report.
Two of the biggest factors that affect your credit score are taking on more debt and not making timely payments. One missed payment can lower your credit score and turn that approval into a rejection.
5. Inaccurate information./Mortgage fraud
Make sure that everything on your loan application is correct. Just because a discrepancy isn’t caught right away doesn’t mean it won’t be. Banks and lenders often perform due diligence and will review your loan terms. If you aren’t being honest about your current situation, it can come back to haunt you.
6. Protecting yourself from denial after pre-approval.
As real estate home buyers, we can’t control everything, but we can prevent a lot of scenarios by being prepared. Do your homework and find out how credit scores work. Practice self-discipline by paying your bills on time and avoid taking on any more debt.