Denied By A Bank For Your Mortgage And Options For Borrowers There should be no reason why mortgage borrowers to be denied after getting pre-approved.
The only reason why a pre-approved borrower gets denied for a mortgage loan after pre-approval is because they were not properly qualified in the first place.
Most Lenders have lender overlays
What overlays are is mortgage guidelines that are on top of the minimum lending guidelines set by FHA, VA, USDA, Fannie Mae, and Freddie Mac
Most loan officers will run a mortgage applicant through Fannie Mae and/or Freddie Mac Automated Underwriting System (AUS)
An approve/eligible per AUS is pretty much a done deal ONLY with Lenders With No Lender Overlays
However, many loan officers make mistakes in issuing pre-approval letters once they get an approve/eligible per AUS without checking with their company’s lender overlays
For example, FHA Guidelines On Collection And Charge Off Accounts state that borrowers do have have to pay off outstanding collections and charge off accounts
However, many lenders will require that any collections over $7,000 be paid off as part of their overlays on collection accounts
Situations like these are the main reasons for last-minute mortgage loan denials
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