What are the chances of being denied a mortgage after pre-approval?

Another very common reason a mortgage is denied after prior approval is because the buyer assumes additional debt. Ask any experienced realtor if they've had a situation where their buyer applies for a new car loan after their home offer has been accepted. The real estate agent's probability is quite high. That's why I recommend that all homebuyers get prior approval before buying a home.

It's a quick and simple process with a lot of benefits. However, prior approval is not a guarantee. Therefore, you may be denied a mortgage even after you have received prior approval. Why? Because the lender will recheck many of those financial requirements as the closing day approaches.

With the increase in income you need to buy an average-price home, you may need to learn about adjustable-rate mortgages to preserve affordability. A prior approval letter is also known as a conditional commitment because it's based on information you've submitted to the lender and a quick review of your credit. Basically, the lender states that they will consider giving you a home loan. However, additional approval is required and will depend on whether or not you can provide adequate documentation for your income, assets and more, and especially whether the property meets the lender's criteria for the type of property, passes inspection and appraisal verifies its value.

In short, something failed the review to the satisfaction of the mortgage insurer, so it was denied. However, some items may be cured (that is, with new documentation or other appraisal) and others may not be cured (that is, your current income does not support the amount of the loan). You'll need to follow the instructions provided in the denial letter and see what can be done to correct your situation and get the loan approved in the near future. To understand the entire pre-approval process, see our comprehensive Mortgage Pre-Approval Guide.

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