Am I guaranteed a mortgage loan if I have been preapproved?

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No. Preapproval does not guarantee that a potential borrower will be given a mortgage loan. Common reasons for individuals to be denied a mortgage loan after already being preapproved include a change of employment, additional debt, negative credit item, appraisal issues, and changes in loan requirements or lender guidelines.

Change of Employment

A change in a potential borrower’s employment is one of the most common reasons that a mortgage loan is denied after the preapproval process. This is because there are usually various requirements that a borrower must meet for length of consistent, documented employment. 

However, there are instances where changes in employment can still be acceptable and will not prevent an individual from being granted a mortgage loan. This can be when the change of employment is in a similar field, for example, as long as income is not changing significantly. Changes in career fields, however, will likely lead to a mortgage loan being denied.

Additional Debt

A potential borrower who incurs additional debt after being preapproved for a mortgage loan is also likely to be denied the loan. This additional debt can have a significant impact on the mortgage application analysis that the lender conducts. These impacts can be directly seen in the debt-to-income ratio, for example.

Negative Credit Item

Potential borrowers do not need perfect credit to take out a mortgage loan. However, potential borrowers do need to meet certain credit score guidelines as determined by the lender. Therefore, a decrease in a potential borrower’s credit score due to a negative credit item can cause the mortgage loan to be denied despite preapproval.

Appraisal Issues

Issues with appraisals are another common reason for a mortgage loan to be denied after a potential borrower has already been preapproved. Some lenders will preapprove a potential borrower with the mortgage preapproval being dependent on a satisfactory bank appraisal. Unfortunately, there can be different issues with bank appraisals that eventually can lead to a mortgage loan being denied.

Changes in Loan Requirements or Lender Guidelines

Despite preapproval, a potential borrower can be denied a mortgage loan due to either changes in the loan requirements or changes in lender guidelines. For example, if there is an increase in the credit score required to qualify for a mortgage loan, borrowers who were already preapproved but no longer meet the requirement will be denied. Other changes in requirements or guidelines can be reflected in debt-to-income ratios, reserve funds or assets available, etc. If changes are applied retroactively, mortgage loan denials can result.

It is important that potential borrowers remain actively aware of their finances and spending practices throughout the duration of their mortgage loan application process. Preapproval does not guarantee that they will be granted a mortgage loan.