Obtaining a new mortgage is often a lengthy process. It begins with your initial application and continues until you close on the loan, which may take place several weeks or even months later. In many cases, the lender doesn't formally approve the mortgage until a few days before closing occurs, and it is possible to receive a last-minute denial.
To qualify for a mortgage, you must have enough income to make your monthly payments and cover any other debts you owe. You must also have a source of income that is stable and reliable, and you must meet the lender's minimum credit requirements. Most lenders will also require you to have a certain amount of money in reserves to pay your mortgage for awhile if you stop receiving a regular paycheck. Finally, the property you are financing must be worth at least the balance of the loan, plus your required down payment.
After you submit your initial application, the lender will either deny the loan or approve it conditionally. When you receive a conditional approval, it means the lender is willing to offer you the loan as long as everything you have told him is true and the property in question is valuable enough to secure the mortgage. To verify that your statements are true, the lender will request documentation from reliable sources. To verify the property's value, the lender will order a formal appraisal.
Most lenders will agree to an anticipated closing date before they have received all of the documentation they need to approve the loan. However, if you are unable to verify any of the information you provided to the lender on your initial application, or if your appraisal comes back lower than expected, you run the risk of a last-minute denial. Likewise, many lenders will re-check some of your most important requirements, such as your credit and source of income, only a few days before closing to ensure that everything is still the same. If you have lost your job, taken on new debt or your credit score has fallen, the lender may ultimately deny the loan.
Dealing With Denials
If your lender denies your mortgage at the last minute, you may or may not be able to revive the deal, depending on the reason for the denial. For example, if the lender denies the loan because the appraisal comes back too low, you can request a new appraisal, or you can offer a larger down payment. However, if the lender denies the mortgage because he learns that you have recently lost your job, you must either show that you have another reliable source of income or simply wait until you have a new job.
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