(Closed) Is it possible to be declined for a pre-approval?

posted 7 years ago in Home
Post # 3
Member
14503 posts
Honey Beekeeper
  • Wedding: June 2011

Yup, I was declined when I first applied for pre approval at 25, but I was able to be approved a year later.

Post # 5
Member
14503 posts
Honey Beekeeper
  • Wedding: June 2011

I had pretty good credit, with a few minor dings.  They said it was my job industry and that it wasn’t a stable industry, they were right.  So inbetween political seasons, I got a job in the insurance industry and a year later reapplied  and six months after I was approved went right back to politics as usual. 

Post # 7
Member
14503 posts
Honey Beekeeper
  • Wedding: June 2011

@BlueDolphin: What state are you in?

I sold my house right before the housing bubble burst, thank goodness.  I only had an issue with the down payment, and it is reverse from what it is now.  I wanted to put down 20% but they only wanted to take 10% and put me on a variable interest.  I  had to put my foot down and days of talking to higher ups to let me put 20% down with a fixed interest.  After what happened with the market, I did the smartest thing and didn’t know it.

Post # 9
Member
14503 posts
Honey Beekeeper
  • Wedding: June 2011

There are a few states that have really made rough restrictions on the banks but that is not one of them that I was thinking of. 

I think you should be fine.  Let us know.  Getting your first house is so exciting!

Post # 11
Member
1137 posts
Bumble bee
  • Wedding: September 2010

There are two different types of pre-approval letters. One is when you do not have a house or a budget in mind, and you have your mortgage professional run your income and expenses through a calculator and find out how much you can “responsibly” afford. Then they write you a letter saying you will be able to get approval for that amount. This is a very smart thing to do before you even start looking for houses, as it prevents you from looking at houses you would not get approved for.

The second is when you have a house or a budget in mind and you ask your mortgage professional to pre-approve you for that amount. This is where you can possibly get declined if your income/debt/credie score does not allow for the amount you are looking for.

Also, keep in mind to that even though your rent is $1100 and your mortgage will be $700, you will also need to pay taxes and insurance, which can add several hundred dollars to your monthly payment depending on your area. Also, you have to account for the fact that you will be responsible for fixing everything that breaks, or any problems you may have (no more calling the landlord!), so it’s smart to also factor in “emergency savings” each month into your house budget!

Having your credit checked for pre-approval will only lower it a few points for a few weeks. It is not considered a “hard look” at your credit, as it would be if you were lookign for loan approval, only a “peek” at your credit.

Post # 12
Hostess
18646 posts
Honey Beekeeper
  • Wedding: June 2009

As others have said, it is possible to be declined.  The no doc loans are out the window (where you just state your income) so you would have to show a few months of paychecks and a few years of tax returns most likely.  The amount that your score decreases for a credit check is minimal so you might as well go in and see what they say.

Don’t forget about the other costs of ownership: insurance, utlities, property taxes, maintenance, etc.

Good luck!

Post # 13
Member
808 posts
Busy bee
  • Wedding: April 2011

Are you trying to get the pre-approval in only your name?  If there is someone else who is going to be on the mortgage- see who has better credit and have them be the the primary and the one with the lesser credit score as secondary.

Post # 14
Member
1137 posts
Bumble bee
  • Wedding: September 2010

Also, not to scare you, but something else to keep in mind. It is possible to be pre-approved when you are looking, but to be declined when you actually go to purchase the house. It used to be pretty rare, but now that the banks are a lot more strict, it’s happening more and more often.

Once you are pre-approved, make sure that you are very careful not to do anything that will negatively affect your credit AT ALL. Do not buy a new car, do not open a new credit card, do not miss any payments on any bills. Do not spend money in accounts that you claimed to have as savings. When your loan goes into underwriting, they will scrutinize every move you made financially and if they are not satisfied, they will deny you.

A few examples:

1. I had a friend who was pre-approved and bought a house. A few weeks before they closed on the loan, they went to buy furniture for the house and opened a credit account at the furniture store. When the bank pulled their new credit report and found that they recently opened a line for $10,000 of furniture, they denied their loan.

2. My cousin was having his parents co-sign on a loan. Between when he was pre-approved and bought a house, his parents decided to re-finance their home. Because they recently had a hit to their credit for the re-finance, they no longer could qualify to co-sign for his loan.

3. Before DH and I bought our house, he was living in my house and paying me rent and utilities. However, I did not claim this on my taxes (he had only lived there for a few months and I hadn’t filed taxes for that year yet). When we went to close on our loan, the bank saw I had deposites in my bank account for hundreds of dollars each month that wasn’t accounted for in my paychecks.  They wanted to deny me unless I could prove where that money came from (we had to draw up a “lease” and submit it to prove it was legal income).

Post # 15
Member
567 posts
Busy bee
  • Wedding: September 2010 - MacLean Park

We were just denied in early January. The main reason was Mr. SD’s credit score was too low. I mean, one bank would finance us, but they required a 20% down payment, which we just didn’t have. Mostly his credit was bad because before we met he was just horrible with finances. Totally irresponsible. Would skip paying bills because he spent all his money on going out and drinking with friends. He’s been to collections at least twice. Since I’ve been on the scene, I helped him clean up his act, but he still missed one payment to the bank last June, and that’s what really killed us during our application. Banks will apply the loan based on the lowest scorer, which sucks. One would only take the lowest of his scores, and another would take the middle one. It still wasn’t quite enough.

If you’re looking to improve your credit quickly, here were a few tips they gave us. Make sure no credit cards or lines of credit are above the halfway mark. Ours were still pretty high from the wedding, so we’ve taken to paying as much down each month as humanly possible. Obviously, pay all your bills on time. And if your husband/SO has good credit, get onto his credit cards/accounts as an “authorized user”. This will help a lot.

Good luck financing your home!

Post # 16
Member
3943 posts
Honey bee

@BlueDolphin: We were denied from a few local banks even for the pre-approval. We had the income but my boyfriends credit score wasn’t great. We eventually got an approval through a very large, well known bank.So just keep that in mind.

The first thing you should do is check your credit score. Not sure if youre doing an FHA loan but I think the minimum score was 720? That was about a year ago. The banks wouldnt even look at our info. if our credit score wasn’t atleast there.

Good luck!

The topic ‘Is it possible to be declined for a pre-approval?’ is closed to new replies.

Find Amazing Vendors