If you were denied for a mortgage after being pre-approved, you’re probably feeling confused and disappointed.
Many people think that getting pre-approved means they’re all set to buy their dream home. But getting pre-approved is just the first step in the lending process—it doesn’t guarantee you a home loan.
If your financial situation changes or the property doesn’t appraise for the full purchase price, your application can still be rejected.
Here are some of the most common reasons buyers are denied for mortgages after pre-approval and some tips to help you move forward after a rejection.
Why Was I Denied for Mortgage After Pre-Approval?
Getting pre-approved for a mortgage is better than getting pre-qualified because your finances are reviewed more thoroughly. Lenders ask you about your income, assets, and debt, and require you to provide documentation to back it all up.
But even after that thorough review, issues can still arise if your financial situation changes. If you lose your job or your credit score drops, you may not meet your lender’s standards anymore.
That’s why you need to be careful with your finances between pre-approval and closing. You shouldn’t take on new debt, make big purchases, switch jobs, or do anything that could be a red flag to your lender.
In some cases, your mortgage denial may have nothing to do with your financial situation.
Mortgage applications can be rejected if the property doesn’t appraise for the full purchase price. Lenders won’t give you a loan for more than your property is worth, so you won’t be able to close on your home if it doesn’t appraise well.
If you’ve been denied for a mortgage but you’re still not sure why, here’s what to do next.
What to Do Next After Being Denied for Mortgage
The first thing you should do after being denied for a mortgage is ask your lender why. Your loan officer may have insight into why your application was rejected, which can help you improve your finances before you reapply.
It’s also important to keep in mind that every lender has different requirements. Even if one lender denied you, it may still be possible to get a mortgage through another financial institution.
Try shopping around and see if other lenders or loan programs have more flexible requirements. However, make sure that you’re not racking up too many hard inquiries on your credit report, which can cause your credit score to go down.
Getting a cosigner may also help bolster your mortgage application if you can’t qualify on your own, so that’s another avenue to explore.
Being denied for a mortgage is disappointing, especially when it happens later in the process after you’ve been pre-approved.
But getting denied doesn’t mean you’ll never be able to get a mortgage. You can find out why your application was rejected, improve your finances, and apply again in a few months.
You may even be able to add a cosigner to your loan or find a lender with more flexible requirements that will give you a mortgage now.