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Can Your Mortgage Be Denied After Its Pre-Approved?

Getting pre-approved is a crucial step in buying a home in Albuquerque. After you speak with a lender, you will receive a letter of pre-approval. Using the letter, you can determine your budget and what your monthly payment can be.

Lenders will look at some major factors before giving you a mortgage pre-approval, which include:

  • Debt-to-income ratio (DTI)
  • Loan-to-value (LTV) ratio
  • FICO score
  • Credit history
  • Employment history
  • Income

Pre-qualifications and pre-approvals are two different things, although sometimes they are used interchangeably.

A pre-qualification is an opportunity for you to give a lender an overview of your financial situation, mainly your income and debts. You are then given a loan amount estimated by the lender.

Lenders don’t verify the information you provide. Pre-qualification is useful when it comes to knowing what you can spend and getting you started looking for homes, but it isn’t important when you make an offer.

Listed below are details about what happens after a preapproval and whether you can still be rejected.

Information is Verified During a Pre-Approval

Pre-qualification means you tell a lender about your finances, but you actually need to fill out a mortgage application to get pre-approved.

You provide your Social Security number to your lender, and they run a hard credit check on you. Your assets, debts, employment history, and bank account information will all be requested by the lender.

Lenders are primarily interested in ensuring you can repay a loan during a pre-approval process.

As a result of the information collected, your LTV and DTI ratios are calculated. They use these factors to determine your best type of loan and the interest rate.

The final loan approval will occur after an appraisal has been completed and the loan has been applied to a property.

Your loan file goes to an underwriter if you are pre-approved. They also verify your documentation with what you have submitted. Your loan application will be reviewed to ensure that you meet the program’s borrower guidelines.

The Underwriting Process

In underwriting, your lender verifies your eligibility for a home loan. Underwriters are also responsible for making sure the property meets the loan requirements. Ultimately, it is underwriters who make the final decisions, and though they must comply with strict guidelines, they do have some latitude in certain areas.

The timeline for initial underwriting approval can vary, but typically occurs within 72 hours of submitting a file. Underwriting can sometimes take a month.

A loan underwriter looks closely at your financial situation. The underwriter will then issue a conditional approval. In a conditional approval, the underwriter predicts that the loan will close even if you are still missing information.

Final approval from the lender means that you can close.

Can Your Mortgage Be Denied In Underwriting?

The underwriting process can result in the denial of a mortgage, although it’s relatively rare.

A lender may deny a loan for a number of reasons, including having too much debt compared to your earnings, having a low credit score, or an appraised value that doesn’t support the sales price.

It is your loan officer’s responsibility to explain why you were turned down. You can try to overturn their denial, and it’s not official until you receive a denial letter.

If you are turned down in underwriting, you can check with other lenders. Having one lender turn you down doesn’t mean they all will give you the same answer. For example, some lenders have manual underwriting options to approve loans when other lenders can’t.

To avoid being denied in underwriting, generally cleaning up your finances and making sure you aren’t trying to borrow more than you can afford helps. You can also make sure your loan application is complete and accurate. You want the lender to have a full picture of everything they need to decide, so there aren’t any surprises in underwriting.


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Albuquerque New Mexico Real Estate YOUR SOURCE FOR ALBUQUERQUE REAL ESTATE! Sandi Pressley offers unparalleled service to ALL clients in Albuquerque and surrounding communities in the New Mexico real estate market. Sandi's motto is "Putting You First." Your complete satisfaction with our service and representation is our number one priority. As a native of Albuquerque, Sandi Pressley has been dedicated to serving her client's real estate needs for over 45 years. Sandi has achieved a goal unprecedented by any other Realtor of being the #1 Top Producing Realtor for 38 consecutive years in all of Albuquerque as well as the entire state of New Mexico. She is also the #1 Top Producing Realtor for the entire Western Region and 8th in the Nation with Coldwell Banker National. Sandi Pressley serves the entire Albuquerque New Mexico real estate market including the surrounding communities such as Rio Rancho, Placitas, Corrales, Bernalillo, Northeast Heights, North Albuquerque Acres, Sandia Heights, High Desert, Foothills, Four Hills, UNM, Nob Hill, Ridgecrest area, Uptown area, North Valley, Northwest Heights, Paradise Hills, South Valley, Southwest Heights, Bosque Farms, Los Lunas, Cedar Crest, Tijeras, and all East Mountain areas. Whether you are considering buying a home, selling a home or both, we know these areas inside and out.

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