Can your mortgage pre-approval be cancelled?

By Michael Jensen, Mortgage and Finance Guru

Edited by Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience

Updated July 14, 2021

The short answer to your question is that a mortgage pre-approval can be cancelled if your personal or financial circumstances change. Your pre-approval is conditional and based on the information you provide the lender. If that information changes, your pre-approval is subject to cancellation.

Events that may result in your mortgage pre-approval being cancelled include the following:

Drop in your credit score. Your mortgage terms can vary based on your credit score. If your score decreases significantly you may be required to pay a higher mortgage rate and you may not be able to afford the loan amount you were pre-approved for. Depending on your specific credit score, you may no longer be eligible for certain mortgage programs.

Increase in monthly debt expense. If your monthly debt payments increase significantly, this reduces the mortgage you can afford and may make your pre-approval invalid. This is why we highly recommend that you wait until after your mortgage closes before you make any major purchases, incur significant new debt or apply for any new loans.

Decrease in monthly gross income. If your monthly income drops, the mortgage you are eligible for may also decrease. Lenders assume that your income is steady so any negative changes in your earnings may also affect your pre-approval.

Change in Mortgage Terms. Some events are out of both your and the lender’s control. If market conditions fluctuate and mortgage rates increase significantly, this can affect the loan you can afford. If you were on the border for being pre-approved for a specific mortgage amount you may no longer qualify.

The table below shows mortgage rates and fees for leading lenders in your area. We recommend that you contact multiple lenders to find the lowest rate and fees. Shopping lenders is the best way to find the mortgage that is right for you.

Job Loss. Your mortgage pre-approval is based on your continued employment so losing your job can result in losing your approval. If you find a new job with similar pay that does not have a probationary or trial period you may need to provide updated employment information to your lender but your pre-approval should remain effective.

Change in Type of Employment. Lenders apply different qualification guidelines depending on your type of employment. If you go from being a regular W-2 employee to self-employed or a 1099 contractor, you may be required to wait one-to-two years before you can apply for the mortgage. In this scenario, your pre-approval would no longer apply.

Change in How You are Paid. Mortgage eligibility requirements also vary based on how you are paid. It can be more challenging to qualify for the loan if you are compensated primarily via commissions or a bonus as compared to being paid a salary or on an hourly basis. If how you are paid changes, your pre-approval may be cancelled and you may have to re-apply or wait until you are eligible.

Different Type of Property. While a mortgage pre-approval typically applies to an individual applicant and not a specific property, if you decide to buy a different type of property your pre-approval may not apply. For example, if you told the lender that you want to buy a single family home but decide to buy a condo or multifamily property instead, you may need to meet different qualification requirements. This does not mean you will not get pre-approved again but you need to review the property with the lender to make sure you qualify.

Despite the issues we outlined above, we highly recommend that you get pre-approved for your mortgage. Getting pre-approved enables you to identify and address potential issues before you apply for the loan and shop for a home with more confidence. Pre-approved home buyers are also more attractive to property sellers because there is greater certainty that your mortgage closes on time.

You can use our get pre-approved form to get approved for your mortgage by leading lenders. Our form is free, easy-to-use, no obligation and does not affect your credit.

Sources

“Get a prequalification or preapproval letter.”  CFPB.  Consumer Financial Protection Bureau, 2017.  Web.

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