3 Things Lenders Don’t Tell You About Mortgage Pre-Approval

However, there are three critical aspects of pre-approval that most mortgage lenders and loan officers do not tell you about.

1. The preapproved number is not final - Once you are issued a pre-approval letter, the qualification amount mentioned on that is not final. What loan amount you qualify for is based on several parameters, and a change to any of those could result in a different qualification number. The number can change for factors like property type, property location, change in your income, asset, credit score, and even the interest rate movement. The preapproval amount is based on a certain debt-to-income ratio, which factors in your monthly obligation towards your current debts and also the projected payment for the house you will purchase. In a rising interest rate environment, future housing payment can go up as the rate increases. Similarly, if you were planning to buy a single-family home and now want to buy a Condominium, monthly HOA dues need to be paid. All this and several other factors mentioned above can increase your future housing payment and lower your qualification amount.
2. Your loan can still get declined even if you are pre-approved - Not all lenders make an effort to do a comprehensive review of your qualification at the pre-approval time. A cursory evaluation is all they do to issue a pre-approval letter. Some online lenders are particularly notorious for issuing a pre-approval letter that is issued in haste and does a terrible job of actually figuring out your loan qualification. It is better to take longer and provide more information now than regret when your offer is accepted and the loan is declined then. Also, even if the lender did a comprehensive review of your qualification, the loan can still get declined for other reasons - like issues related to the property or any new information that comes to the underwriter’s attention later.
3. The pre-approval process can impact your credit score - Every time your credit is pulled, it might impact your credit score negatively. Sometimes, even a 1-point change in credit score could be the difference between qualifying for a loan program or not. Credit scores also play a crucial role in your interest rate - typically lower the credit score, the higher rate you will get. But a credit pull is essential for a comprehensive evaluation of your loan qualification, without which it is impossible for mortgage lenders to figure out your actual qualification. However, a few lenders now offer a soft-pull option for your credit, which is not considered an inquiry by the credit bureaus and doesn't impact your credit score. Consider working with such lenders.

The best thing you can do even after getting pre-approved is to be constantly in touch with your loan officer and discuss any change in your qualification parameters. All loan officer at InstaMortgage Inc. keep our borrowers posted on the interest rate and guideline changes and if they will impact your loan qualification.

About the Author –

Author Shashank Shekhar is the CEO of the fastest Growing Mortgage company InstaMortgage Inc. head quartered in San Jose CA.

Amazon.com #1 best-selling author Shashank is named "2022 Entrepreneur of the Year" by Stevie Awards. He was the expert guest of the TV and radio show - "Mortgage Matters" and the author of widely acclaimed books - "First Time Home Buying 101", "Real Estate Unleashed" and the latest #1 best-seller "My First Home".

Besides writing one of the topmortgage blogs in the country, Shashank also gets invited to blog on several of the top websites and gets frequently quoted in national and international media. He was interviewed by Emmy Award-winning director Nick Nanton on his TV show. He is the host of "Shashank Redemption" podcast where he talks about entrepreneurship, startups, and FinTech,