5 Reasons Buyers Can Be Denied a Mortgage After Being Pre-Approved in Hamilton

Getting pre-approved for a mortgage is an important step before you start seriously looking at homes in Hamilton.

But there is an important distinction between being pre-approved and having your mortgage fully approved for a particular property.

A pre-approval gives you useful information about your potential borrowing capacity. It doesn't mean the lender has approved every property you might eventually choose to buy.

So what can cause problems between pre-approval and final approval?

Here are five things buyers should understand.

1. The Property Doesn't Appraise for What You Offered

Once you've found a home and have an accepted offer, the lender may require an appraisal of the property.

If the lender determines that the property is worth less than the amount you agreed to pay, that can create a financing problem.

For example, if you agree to pay $700,000 for a home but the lender's appraisal comes in below that amount, the lender may not be willing to finance the purchase based on the full purchase price.

That's one reason it's important not to assume that a pre-approval means the financing for your eventual purchase is guaranteed.

2. Your Financial Situation Changes

A mortgage application is based on your financial circumstances.

If something significant changes after you've been pre-approved, it could affect your ability to qualify.

That might include a change in employment, a significant reduction in income or another change in your financial situation.

The safest approach is to talk to your lender or mortgage professional before making a major financial decision while you're in the process of buying a home.

3. You Take on New Debt

This is one of the easiest mistakes to avoid.

If you've been pre-approved for a mortgage, you might be tempted to start thinking about everything else you could buy once you have your new home.

This is not the time to finance a new vehicle, open new credit accounts or significantly increase your credit card balances.

Taking on additional debt can change the financial picture that your lender used when assessing your mortgage application.

My advice? Until you've closed on the house, keep your finances as stable as possible.

4. Your Credit Situation Changes

Your credit history and credit profile are important parts of the mortgage qualification process.

Missing payments, taking on significant new debt or making other changes that affect your credit could create problems between pre-approval and closing.

Once you're pre-approved, don't think of the process as finished.

Keep making your payments on time and avoid making unnecessary changes to your credit situation while you're buying your home.

5. The Mortgage Doesn't Work for the Particular Property

Getting pre-approved for a certain amount doesn't necessarily mean that every property within that price range will work for the lender.

The property itself, the type of home, the down payment, the appraisal and the details of the transaction can all matter.

There can also be changes in lending requirements or circumstances that affect the final decision.

That's why it's important to stay in communication with your mortgage professional throughout the purchase rather than assuming that your pre-approval is the final word.

Pre-Approval Is Important — But It's Not the Finish Line

Getting pre-approved before you start looking at homes in Hamilton is a smart way to understand your financial starting point.

Just remember that pre-approval isn't the same thing as final mortgage approval.

Once you find a home you're interested in buying, your lender will need to assess the specific property and the circumstances of the purchase.

If you're thinking about buying a home in Hamilton and want to understand how the process works, I'm happy to help you navigate the real estate side of the transaction.

Have questions about buying a home in Hamilton? Let's talk.

Sincerely,
Mike McCarthy, MBA
REALTOR®