Can you get denied after preapprova

Discussion in 'Credit Talk' started by creditone, May 13, 2003.

  1. creditone

    creditone Member

    We got in a preapproval with a mortgage (we don't have the greatest credit, 2 yrs post bankruptcy, some lates on medical bills)
    I wanted to give our landlord 30 days noticed, since the builder said it would be OK to close then, but the mortgage guy said to hold on until the underwriter approves it.
    My question is besides going off and buying a new car and boat before closing, why else would a preapproval turn into a denial?
    Thanks,
    on pins and needles!
     
  2. supershawn

    supershawn Well-Known Member

    Hi!

    First of all, Congrats! You will be much happier in your own home with no landlord- I remember that feeling!

    Sadly, YES, you can get denied after pre-approval. Even sadder, 'pre-approved' is an easy term to throw around in the mortgage business. A very close friend of mine (and her husband) were burned by saying sayonara to their landlord before everything was official.

    What I would do, not that I am an expert or anything, is hold tight, keep in close contact with your lender- make sure you respond to anything the underwriter needs in a very timely manner- and be prepared for anything. Do not apply for anything or make any new charges on any accounts you have. If anything, try to keep as much cash around as you can for any pre-closing suprises (they happen, I got socked with 3k more on closing day).

    Dealing with a builder is good as they usually have a little clout with lenders and have leway to 'fudge' some numbers (i.e. creative financing).

    I'll cross my fingers. keep us posted!


    Shawn
     
  3. jam237

    jam237 Well-Known Member

    Yes, pre-approved is not-pre-approved...

    Chances are if you read the fine print, it'll have (usually in microfine grey on grey -- invisible type) a statement that tells you that the pre-approval is conditional upon your full credit bureau file. If anything changes when they give it a closer look, they can either revoke the offer completely, or change the terms of the offer.
     
  4. dman4384

    dman4384 Active Member

    lol.

    Pre-approval has got to be one of my favorite terms that means the opposite of whatever thinks it does.

    Everyone assumes means pre approved means "that you have been approved". Actually it means "you have not been approved"


    Consider..

    Pre equals "before, not done yet"

    approval equals "meets requirements"

    So preapproval means...before meeting requirements...or more simply.."before approval"

    But hey!..being pre-approved does sounds better doesnt it.
     
  5. marci

    marci Well-Known Member

    If you are pre-approved (as in automated underwriting pre-approved), it's very rare for you to get denied for a mortgage. But it can happen if:

    1. The appraisal comes in below the financed amount.

    2. The builder is screwy re his/her own financial standing and quality of construction (i.e can the builder finish the job and will the property have good value when it's done?). Remember, this is the bank's property, not your's and the bank wants to make sure it won't fall into a sinkhole or be sitting on an undisclosed radioactive site after you close. I exaggerate, but you get the picture...

    3. The title can't be released to you (i.e. messy foreclosure).

    4. There are too many recent non mortgage inquiries that spook the underwriter.

    These are some examples i can think of, but again, they are rare.

    On Broker Universe, I read of a person who applied for a Jeep a few weeks before closing (after he went under contract) and got denied. The broker handling his mortage was ticked off to no end.
     
  6. Mycroft

    Mycroft Well-Known Member

    The truth is nothing is final until the loan papers are signed and the loan is funded. Sometimes things happen, and they can't be forseen. A few days ago, I spoke to a woman who was in the process of selling her home, and a tornado came along and damaged it. Go figure?

    A preapproval is as good as the information and assumptions that go into it. If you tell me your credit is X and your income is Y, I'll preapprove you on the spot, but that's not worth anything if when I check the credit and income I find out it's something different.

    Relax. Your loan officer is jsut being cautious.
     
  7. creditone

    creditone Member

    Thanks everyone, I am still waiting. How long does this underwriting take?
     
  8. Mycroft

    Mycroft Well-Known Member

    Re: Re: Can you get denied after preapprova

    That depends on the underwriter, the company, how busy they are, ect.

    Sometimes they underwriter will come back with stipulations. They may want another bank statement, and explanation of something on the credit report, another comp on the appraisal...whatever. Once your loan officer gets the stips and clears them, then it's just a matter of getting the final numbers, pulling the documents, and scheduling the closing.
     

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