Negative equity won't technically stop you from selling your home, but a mortgage lender won't settle your loan until you've paid your entire outstanding loan balance. If you sell your home for less than your current mortgage, you must pay your lender the difference in cash.
How much should I get pre-approved for? It is recommended that you get pre-approved for the absolute most you would ever consider to borrow. You can always borrow less but if you end up requiring more than the pre-approval, the whole assessment process needs to start again.
If the amount is too low, you might not be able to buy the home you want. To raise the loan preapproval amount, you might need to increase your income, lower your debt, improve your credit or do a mix of these factors.
Mortgages can get denied and real estate deals can fall apart — even after the buyer is pre-approved. If you're aware of the pitfalls, you'll reduce the chance it can happen to you!
Can My Security Deposit Be Returned If My Mortgage Is Denied At Closing? If you have a contingency in place that includes an offer and purchase contract, you may be able to get your earnest money back. However, if you don't have it, you could lose it.
Simply, if you're preapproved for a mortgage there is still a possibility you could be denied after. In fact, approximately 5,741 VA loans were preapproved but not accepted according to 2022 HMDA data.
You can make an offer on a house that goes beyond what your preapproval letter will cover, but you will be expected to make up the difference out of pocket. If you can't increase the size of your down payment, then you can't make an offer that goes beyond your preapproval.
You don't have to worry if you apply for mortgage preapproval with several lenders within a short time frame because you're shopping around for the best mortgage rates. Your score won't drop each time a lender checks your credit.
There's no limit to the number of times you can get preapproved, but keep the potential credit score impacts in mind. Consider researching any lenders you're interested in so you can narrow down your list and then apply for preapproval from your top choice or a few top choices.
Current mortgage interest rates in California. As of Sunday, January 12, 2025, current interest rates in California are 7.33% for a 30-year fixed mortgage and 6.61% for a 15-year fixed mortgage. This aligns with current national mortgage rate trends.
Checking for pre-approved credit card offers won't hurt your credit because typically, pre-approval involves a soft inquiry. Also known as a soft pull or soft credit check, a soft inquiry doesn't affect your credit scores. It's simply a way for lenders to determine whether you may qualify for their credit card offer.
If the buyer absolutely cannot come up with the cash to close, they may lose their deposit and the seller can put the home back on the market. Having insufficient funds at closing could cause the buyer to default on the purchase agreement.
The 25% post-tax model suggests keeping your total monthly debt at or below 25% of your post-tax income. To calculate your affordable mortgage payment, multiply your post-tax monthly income by 0.25. For example, if you earn $8,000 after taxes, you may be able to afford up to $2,000 for your monthly mortgage payment.
This phenomenon is actually known as an "underwater mortgage," which can also be called an upside down mortgage. "An upside down mortgage is when the principal exceeds the value; in other words, you owe more than the home is actually worth," says Christopher Rotio, the Executive Vice President of Town Title Agency.
Starting early on your search gives you enough time to explore different neighborhoods, view multiple properties, and find the right home for you. The best time to get pre-approved for a mortgage is between 1 and 4 months before buying a home.
We recommend tailoring the preapproval letter to match your offer, especially if your offer is for less than you qualify for. If the seller sees you are qualified for more, they could try to negotiate higher.
During the preapproval process, a mortgage lender will look at your income, assets, and credit history when underwriting your application. The details of your financial situation will dramatically impact the amount you are preapproved for.
The report also shows that the denial rate of Federal Housing Administration (FHA) loan applications differed from the overall average, at 12.4% in 2021.
You can have multiple pre-approvals at the same time, and in fact, it's often a smart move done by savvy first-time home buyers and real estate investors. There is technically no limit on the number of pre-approvals you can get which makes shopping around with different lenders a no-brainer.
If there are any changes to your credit score or employment status, your loan can be denied during the final countdown.
Denial of a Loan
If a purchase agreement includes a loan financing contingency, and a buyer is denied a loan, they can back out of the transaction and get their earnest money deposit refunded.
Two months' worth of bank statements is the norm because any credit or deposit accounts older than that should have appeared on your credit report.