Mistakes that can Delay Your Mortgage Approval

Mistakes that can Delay Your Mortgage Approval


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Mortgage ApprovalReceiving your final mortgage approval is big step in locking in your next home. However, there are plenty of potential obstacles to trip you up along the way. Below is a list of common mistakes that may cost you your mortgage approval.

Neglecting to Include Details of Your Financial Profile

A good lender will begin with the basics: reviewing your personal and contact information, your employment and residence history, assets, income and debts.

That sounds simple, but only if you answer truthfully to all of them whether in person or by filling out a form. If you leave out any detail, it might be the one little thing that costs you your mortgage approval.

Neglecting to Provide All Required Documentation:

Your lender will then ask you for detailed documentation for your profile, including:

  • Pay stubs
  • Two years’ tax returns and W-2s
  • An up-to-date financial statement if you’re self-employed
  • Two months of statements for all asset accounts
  • Paper trails and explanations of all deposits above $1,000
  • A home insurance quote
  • Financial disclosures on any other homes or businesses you own

If any of these documents is missing, you’ll be required to provide it. If your income is commission-based, you have to give authority to your lender to verify it with current and past employers.

Your lender will also do a run on your credit, which can reveal addresses, debts and other credit inquiries that you may not have disclosed. Should new information be discovered, you’ll be required to explain and document it.

Not knowing the Difference between Approval and Pre-Approval

Misinterpreting approval status can kill deal, so remember this: get your loan pre-approved by an underwriter long before you make an offer to a seller.

Mortgage pre-approval means you’ve talked to a lender and provided some documents to which the lender says your profile looks good. However, this is not a loan approval.

Ensure you get “underwriting approved” and obtain a formal loan commitment in writing. If you do not get this, it simply means that your profile has been evaluated but the loan approval only begins when your agent submits your file onwards to the underwriter.

Not Sharing Offer Details with the Lender

The purchase contract clearly dictates transaction timing milestones, such as the period that you are given to secure loan approval as well as how many days you have till closing.

While your real estate agent will take the lead here, ensure that she and the lender are in sync. This is because the dates that the agent gives in the contract are to be provided by your lender. If you fail to meet these milestones that are already written into your contract, you risk losing your deposit. The only way to ensure that doesn’t happen is by carefully executing the steps above.

Avoid the shocks that disrupt the process by asking your lender to quote mortgage rate locks based on your expected closing timeline. Keep in mind that if you’re expecting it close on qualifying and the rates go up, the resulting cost increase could interfere with your loan approval. Ensure your lender has in mind the possibility of higher rates so your loan approval remains untouched even in the event that rates rise while you’re still shopping for a home.

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