Number 4

4 Reasons Borrowers Lose Pre-Approval Status

The Short Version

  • Pre-approval letters are typically only valid for thirty to sixty days at most.
  • If the house appraises for considerably lower than estimated the pre-approval may be rescinded.
  • If the borrower's credit score or financial situation changes it is possible they will rescind the approval.
  • If borrowers are pre-approved for a loan program that expires, they will have to look for a new program.

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While being pre-approved is recommended, it is possible to lose that approval. Real estate agents, lenders, and others in the housing industry agree that buyers are taken much more seriously when they are pre-approved, but those who have gained this status may find that they lose it if their financial situation changes. This is especially true for borrowers who have only just met the pre-approval guidelines. However, there are other things that could cause a borrower to lose pre-approval status:

1. The pre-approval expired.

Pre-approval letters are typically only valid for thirty to sixty days at most. If that time period expires, the borrower will have to supply the lender with new paperwork. If that paperwork doesn’t show the same income and assets as the originals, the lender may not renew the pre-approval.

2. The home appraisal.

If the house appraises for considerably lower than estimated or if the property for whatever reason does not meet the lender’s guidelines, the pre-approval may be rescinded. Lenders only pre-approve the buyer, not the property, and they may decide that they cannot extend credit for some houses.

3. Financial status changes.

If the borrower’s credit score or financial situation changes between being pre-approved and the final check by the lender, it is possible they will rescind the approval. This can include the borrower losing their job, changing jobs, or taking out other loans.

4. The loan program ended.

Some loan programs, especially those backed by Fannie Mae or Freddie Mac, may end after a certain time. If borrowers are pre-approved for a loan program that expires, they will have to look for a new program.

Congratulations if you have been pre-approved for a mortgage. Now make sure you close on a house while your pre-approval remains valid.

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