Mortgage Pre-approvals are NOT always Guaranteed



Obtaining a pre-approval for a mortgage is an important first step to purchasing a home, so you have an idea of the price you need to shop for and what to spend. But it's not always a guarantee you'll get the financing or even the exact amount they originally mentioned. 

Pre-appoval mortgages
Photo credits: realtor.com
 What are Mortgage Pre-Approvals? A pre-approval is the preliminary estimation by a Lender or Bank that estimates how much the Lender will loan you based on very basic information after reviewing your finances and debts. This number is subject to change based on what property you buy, whats in the accepted offer and the details of your financial situation versus debts. An idea as to how much you can borrow and what your payments will look like, you can determine an estimate through our mortgage calculator. 

Why Your Mortgage Pre-Approval may not match the Mortgage You Get!

After an accepted offer is placed on a home  your contract will be sent to your lender for approval. They will analyze this along with your current financial situation. If anything has changed in your employment, debt or financed between the time you received the pre-approval and the time you sealed an accepted offer, a price adjustment could be in effect. 

A pre-approval is NOT a binding agreement between you and the lender. It’s completely possible that a lender denies your mortgage application because of any changes to your circumstances after your finances were initially reviewed. Below are some instances when your mortgage application can be denied:

You purchase a car
Loss of a job or been demoted
You accumulate debt on your credit cards
Your equity in your home has changed
You have a major renovation project in the midst. 
Taxes are due and have not been paid
Un-forseen personal costs arise
Down Payment changed 

Increasing your Total Debt Service Ratio (TDS) could be the result of any of these circumstances and could stop your from obtaining a mortgage or not being approved for the amount promises originally.
If the application is denied, the lender may request that you get more money for you down payment or get a co-signer, like a family or friend to assume the debt along with you. 

Also, the Lender before approving financing, will look at the property your are buying and question if it is a formidable investment. Some lender will not lend money for various reasons to do with the land or house. Some will expect a higher down payment, resulting in a different loan all together. 
Is it a leaky condo, manufactured home on band land, any issues on title, type of land use, problems with the home itself?

The path to home ownership can be complicating, but if you know what can stop you from getting final approval of your mortgage, you can avoid the pitfalls and be a step closer to getting the home you want.