Your Income Has Changed
If your income has declined since you were preapproved, that could hurt you when you apply for a mortgage. Lenders want reassurance that you have steady, reliable income to make your future loan payments.
Yes, your home loan application can still be declined, even if you have pre-approval. Applying for a home loan and being rejected, even after getting pre-approval, can come as a shock.
FYI, pre-approvals and prequals are no indication of approval. You can still be denied after receiving a pre-approval.
Mortgage lenders will do a hard credit pull during pre-approval, which can temporarily drop your credit score by an insignificant amount.
Aside from changes in credit, the two most prominent conditions involve the appraisal of the desired property and final approval from the lender's underwriting team. If the conditions in your preapproval letter are not met, your loan could fall through.
No—they may involve a soft inquiry, which won't affect your credit score. If you are pre-approved for a specific card you will receive an offer. The offer itself doesn't generate a hard inquiry, so don't worry—just because you have the offer doesn't mean you've hurt your score.
Common reasons for credit card denial despite good credit
They want to ensure that, at the very least, you can afford to make your minimum monthly payment. It is therefore possible for you to have a 700+ credit score but be denied a new credit card because your current credit is already high relative to your income.
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.
The short answer to your question is that a mortgage pre-approval can be cancelled if your personal or financial circumstances change. Your pre-approval is conditional and based on the information you provide the lender.
Some of the cases where a lender could potentially decide to revoke your mortgage pre-approval include: You lose your job or main source of income. The property you want to buy fails to meet the lender's requirements. You have been dishonest on your application.
Yes, your loan application may be denied after you receive a conditional approval, although that is usually unlikely.
You may be wondering how often underwriters denies loans? According to the mortgage data firm HSH.com, about 8% of mortgage applications are denied, though denial rates vary by location and loan type. For example, FHA loans have different requirements that may make getting the loan easier than other loan types.
Pre-qualification doesn't necessarily guarantee approval. The same goes for pre-approval. With pre-qualification, lenders review your creditworthiness using basic financial information. But this doesn't guarantee approval.
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.
Having a good credit score is just one factor in the approval process. Lenders consider various factors like income, existing debt, and credit history. If your income is insufficient or if you have a history of late payments or high debt, you may still be rejected despite a good score.
There's no such thing as “too many” hard credit inquiries, but multiple applications for new credit accounts within a short time frame may point to a risky borrower. Rate shopping for a particular loan, however, may be treated as a single inquiry and have minimal impact on your creditworthiness.
It's a good idea to wait three to six months between credit card applications.
Getting a pre-qualification or pre-approval letter is generally not a guarantee that you will secure a loan from the lender. However, it may help you prove to a seller that you are able to receive financing for your purchase.
Generally, preapproved offers, such as those from credit card issuers, don't directly impact your credit score. But once you accept the preapproval, the lender will likely review your credit history as part of a more thorough final approval process, which will result in a hard inquiry.
670–740: Good credit – Borrowers are typically approved and offered good interest rates. 620–670: Acceptable credit – Borrowers are typically approved at higher interest rates.
A hard credit inquiry could lower your credit score by as much as 10 points, though in many cases, the damage probably won't be that significant. As FICO explains, “For most people, one additional credit inquiry will take less than five points off their FICO Scores.”