The preapproval process is perhaps one of the most important when it comes to buying a new house. While it is possible to view new homes and begin the process without a preapproval, there are always some sellers and even some realtors who will not show a home to anyone without a preapproval and sometimes even proof of funds. It all depends on the house, the seller and the realtor. Knowing you are preapproved for a mortgage makes the home buying process so much simpler, but it doesn’t change the level of stress. In fact, sometimes your mortgage preapproval can stress you out even more than you might imagine.
You see, not all preapprovals mean you can still get a mortgage once you put in an offer on a house and then go into buying. It is highly unfortunate, but you might not end up with the mortgage you want – or any mortgage – after a preapproval for a number of reasons. We don’t want you to go into the home buying process without some knowledge. It’s stressful. When my husband and I bought our dream home almost two years ago, we were terrified every step of the way. We could not stop thinking the worst in every situation. What if something is wrong with the house? What if someone comes in with a higher offer? What if someone decides that they don’t want to sell anymore? What if something happens that we don’t see coming such as identity theft and we don’t know it and our credit is ruined between now and closing?
There are so many things to think about, but it never even occurred to us that our preapproval might be denied when it came to actually obtaining our mortgage. Thankfully, it wasn’t; even though we still own our other home and have no desire to sell. Sadly, it did happen to someone we know through our daughter’s cheerleading squad, and they were horrified. It made me realize that sometimes we don’t think of things the way we should, and I want everyone to know in advance what they might be getting into.
That in mind, I thought I might bring to you a bit of important information regarding denied mortgages after a preapproval. It happens – a lot. The good news is that most of the time it can be avoided if you simply know what not to do when in the market for a mortgage and once you are preapproved. Here are some of the most common reasons you’re preapproved and then denied a mortgage.
You Buy New Things on Credit
Our best friend is a realtor, and she is so constantly disappointed in her buyers when they go out and finance all new furniture or a new car or something before they close. You see, you might be denied your mortgage if you go out and do that. She tells all her buyers to be very careful to pay only cash for things that you might want when you are in the middle of closing and finance NOTHING until after you close and have those keys in hand. Your debt-to-income ratio is so very important, and that new car or couch might just make the difference between buying a new house and not.
You Change Jobs
Hey, there’s nothing wrong with getting a new job. People do it all the time. You have a better offer, you have a better schedule; you make more money. Whatever it is, moving jobs is not a big deal. Unless, of course, you are in the process of buying a new home. Some mortgage types require that you have certain employment information to qualify. For example, an FHA loan requires you have the same employer for at least two years. Changing them out in the middle of the process means you no longer qualify for that mortgage.
One of the biggest issues with a loan is the appraisal. A bank will not approve you for a mortgage on a home that is not worth the price. Let’s say you fall in love with a house that is $300,000 for sale. When the appraiser comes in and does the appraisal, however, the house is only valued at $250,000. Unless the seller drops the price to $250,000, the bank is not giving you a loan for the amount being asked. Now, that doesn’t mean you cannot buy the house. You can put more money down and get the house under the appraised value.
Other loans have certain requirements that mean you cannot be too close to certain businesses and even other things. If a certified real estate appraiser finds out that the home does not meet the requirements, a loan might be denied.
Don’t be discouraged, however. There are always options such as not breaking any of these rules and choosing your mortgage type very carefully. You can do it, but you might have to get a little bit creative if your mortgage is denied.
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