6 Reasons a Mortgage Pre-Approval Might Be Withdrawn
Getting a mortgage pre-approval should be everyone’s first step when they start looking at new
homes for sale. For the seasoned homebuyer, they feel they have it covered and many first time home buyers do not realize the importance of a conditional pre-approval.
Having finance in place from the beginning lets you know exactly which homes currently for
sale on the real estate market you can afford. It also puts you and your real estate agent in a
strong negotiating position once you’ve found that perfect dream home, and it speeds up closing
to reduce the risks of the deal falling through.
However, a pre-approval isn’t foolproof. It’s rare for this to happen, but a mortgage approval can
be withdrawn at the last minute, leaving you high, dry, and without your dream home.
Luckily, most of the things that can cause this disappointment are under your direct control.
Here’s what to avoid if you want to keep your mortgage pre-approval valid and intact.
1) Changing Jobs
Switching jobs is a big no-no during the closing process. You may think moving to a better-paid
job would improve your credit score, but the opposite can be true.
If you leave a longstanding position for something new and unknown, you’re introducing a new
element of instability into your financial situation. This may be enough to give a mortgage lender
This is especially true if you make a substantial career change rather than receiving a promotion
within the same company or field.
Although you don’t need perfect credit to buy a home, you should strive to avoid any new
negative entries on your file once your pre-approval has been granted.
A single black mark on your record could be enough to push you down a level in the lender’s
approval ratings, and they may insist you restart the application process because of it.
3) Taking on Extra Debt
Even if you have a great credit rating, it’s important not to increase the amount you owe until the
home’s keys are in your hand. Do not apply for any new credit. Your total indebtedness is a huge factor in your credit rating, and you want to avoid this changing for the worse.
Resist the temptation to spend anything on your credit cards, even for essentials such as
furnishings for your new home, unless you can pay it back immediately.
4) Opening New Credit Lines
In the same way, don’t take out any new credit cards or other credit lines. Don’t accept any credit
limit increases your card issuers may offer, or any new overdraft facilities from your bank.
If you suddenly have an easy way to run up more debt, this increases the risks for your mortgage
lender. They could easily withdraw their offer while they reconsider.
5) Approval Criteria Changes
All mortgage lenders refine their approval criteria over time. You may find that a loan you were
approved for six months ago now has tighter acceptance requirements.
Because of this, don’t let your pre-approval grow stale. Even if it has a long period of validity in
principle, it’s best to refresh it if you’ve been house hunting for more than a few months. You
don’t want to risk having to reapply on new terms if there’s a delay in closing.
6) Appraisal Problems
Lastly, if there’s a problem with the home’s appraisal you could see the mortgage offer being
withdrawn. Unfortunately, there’s little you can do if this happens.
The lender may agree to offer new finance if the sale price can be negotiated downward, but this
is risky for your financial future. Don’t let enthusiasm blind you to any problems an appraisal
turns up, or you may quickly come to regret going through with the purchase.
Not all of these changes guarantee your pre-approval will be withdrawn. Lenders will always
allow some leeway, and it will take a human review before any decision is made.
However, it’s best not to take any risks during closing, where a delay could make the whole deal
fall through. If you have any doubts about possible changes in your circumstances, it’s worth
paying for the advice of an impartial mortgage consultant.
But on the whole, once you’ve received your pre-approval and the buying process is advancing,
keep your money life as stable as possible to avoid the crushing disappointment of losing your
perfect dream home.