Before you go house shopping in Orlando, the most important thing to do is get pre-approved for a mortgage.
With a pre-approval letter in hand, you’ll know how much you can afford to pay for a house.
This amount of the loan you get approved for is determined by your lender based on your income, your expenses, how much you can afford as a down payment, and your credit.
The whole pre-approval process is something that every potential home buyer goes through when applying for a loan.
Most people think that once you get pre-approved all you have left to do is find a house to buy and proceed to close.
Unfortunately, this isn’t always the case and some buyers are given a rude awakening when they go to get their mortgage.
Sometimes, even though the buyer was pre-approved, the bank refuses to sign off on the loan.
After working as a real estate agent in Orlando for the past twelve years, I can give you some tips on what to watch out for and how to avoid the pitfalls of getting denied for a loan after you’ve been pre-approved.
These are the most common reasons loans get denied after they’ve been pre-approved
1- A Change in Loan Requirements
Sometimes lenders can change their requirements for mortgages without any notice. For example, a bank may have had a minimum credit score requirement of 625, but for some reason, they increased it to 675.
Although you may have already been pre-approved under the original guidelines, when you went to get the loan, the requirements have just changed. In this situation, there isn’t much you can do here except go to another lender.
2-Taking On More Debt
When you get pre-approved, it’s based on your current situation. A portion of the lender’s criteria is the amount of debt you are carrying at the time of your mortgage application. If the buyer accumulates more debt after they’ve been pre-approved for a loan, it can cause their pre-approval status to vanish into thin air.
A good mortgage broker will advise you on the do’s and don’ts of accumulating more debt while going through the loan application process.
3- Changing Jobs
One of the most important items in determining your eligibility for a loan is your employment. The bank needs to know that you’re financially capable of making your mortgage payment every month and they will put your employment history and income under the microscope.
If for some reason you change jobs during the mortgage application process then you’re taking a chance that the lender may drop you like a hot potato. It’s best to try and remain at the same job while your mortgage loan is being processed so that you don’t throw up any red flags.
Certain loan programs like FHA for instance, require the buyer to be at the same job for a minimum of 2 years. It’s best to discuss any possible job change with your mortgage advisor before making any drastic changes.
4- Negative Hits to your Credit
Someone’s credit rating can change on a regular basis because of several different factors. Failing to make a payment on time or taking on additional debt can negatively affect your credit score almost instantly.
If this happens during your loan application…. even after you’ve been pre-approved, it can cause you to be denied a mortgage.
5- Appraisal Comes In Too Low
In most Orlando real estate transactions, the appraisal value of a home is a “do or die” piece of the puzzle. In other words, if the appraisal comes in lower than the purchase amount there are two things that can happen at that point. Number 1, the seller can lower the sale price of the home to match the appraisal value, or…B, the seller refuses to lower the price and you continue home shopping.
6- Fraudulent Documentation
Although highly uncommon these days, it still does happen from time to time. This is when a borrower intentionally gives their lender falsified documentation at the time of the mortgage application.
At some point during the process when the lender finds out the buyer committed mortgage fraud, they will cancel the application in a heartbeat.
Protect yourself from being denied after being pre-approved
In some situations, things can be out of our control however it is possible to avoid many of the above-mentioned situations. The best thing you can do is educate yourself on how FICO scores work and avoid doing anything that can negatively impact your credit rating.
Seek guidance from your Orlando Realtor or your mortgage adviser before making any hasty spending or employment decisions so you can avoid any roadblocks that could keep you from getting a home loan.
