Caution! 5 Reasons a Mortgage is Denied After Pre-Approval

Reasons a Mortgage is Denied After Pre-ApprovalYou’re in the process of buying a home. You’ve done your due diligence and everything looks great for you. Now, all of a sudden, your mortgage loan was denied even though you were pre-approved.

Is this possible, and how can this happen, are probably questions you’re asking.

The sorry truth is that it is possible to be pe-approved for a mortgage loan and still be denied later. Here are 5 reasons why this could happen.

1. Negative Changes on Your Credit Report

Beside income and employment, your credit report is one of the most important factors in determining if you’re approved or pre-approved for a mortgage loan.

The credit report tells the lender not only what debts you have now and have had in the past, but how you’ve paid your debts.

The higher your credit scores, the better it looks to lenders. If the home buying process takes a few weeks, your credit scores can change.

If you’ve obtained more credit or made late payments since you applied for your loan, your credit scores could go down and cause the lender to deny your loan.

2. Change in Employment

Changing employment in the middle of the home buying process can cause you to be denied the loan even if you were pre-approved. Your employment was also an important factor in determining if you’re approved.

The lender needs to know that you have steady employment so you can make the mortgage payments. In some cases, a different employer may not make a difference, but it can hurt you.

If you are contemplating changing employers, ask the lender if it will make a difference.

3. You’ve Incurred More Debt

Lenders typically run your credit report when first apply for the loan and again just before the loan closes. If you’ve incurred more debts since you first applied for the loan, it will affect your credit scores.

One of the factors that determine your credit scores is your credit limits in relation to how much of your credit limit is utilized. If you’re considering getting some credit cards, you might want to consider waiting until the mortgage process is complete.

4. Appraisal Problems

One very important step in the home buying process is the home appraisal.

Lenders typically don’t like to lend more than 80 percent of the home’s appraisal value. Even if your loan was pre-approved, you risk being denied the loan if the home is appraised for much less than what you’re borrowing.

The pre-approval was based not only on your financial information but also on the home’s value being close to or higher than the loan amount. When looking at homes, it’s important to see if a current appraisal is available to use as a guideline.

5. Changes in the Lending Laws

Although this reason is rare, changes in the lending laws or the banks requirements can affect your being approved even if you were pre-approved. One example can be with your credit scores.

Most lenders have a guideline of what they want their borrower’s credits scores to be. If the lender changes its requirements during the buying process, it can cause a loan to be denied.


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The Difference Between Pre-Qualification and Pre-Approval

Mortgage Loan - The Difference Between Pre-Qualification and Pre-ApprovalGetting a mortgage can be both intimidating and exhilarating. After all, it’s the first step towards buying your dream home and becoming a home owner.

There are many steps towards getting a mortgage, and completing each step can make the process go quicker and with few problems.

Being pre-qualified and/or pre-approved for a mortgage loan can be quite helpful. While these two terms are often used interchangeably, they are two different things. Here is the difference between being pre-qualified and pre-approved.

What Does Being Pre-Qualified Mean?

Being pre-qualified for a mortgage loan means the lender will probably give you a mortgage loan based on the information you have provided.

On your initial visit to the lender, you’ll be asked to fill out an application and provide certain personal information. Based on this preliminary information the lender may or may not pre-qualify you for a mortgage loan.

It’s important to understand being pre-qualified does not mean you will get the loan. It just gives you an idea of if you may be approved for a loan.

What Does Being Pre-Approved Mean?

Although being pre-approved is not a 100% guarantee you’ll get a mortgage loan, it’s about as close to getting the loan as you can get.

The lender will typically write you a pre-approval letter to show to sellers or real estate agents indicating that you are not only approved for a loan but also how much you’ll be approved for.

Unlike the pre-qualification process which is based on preliminary information, the pre-approval process takes place after the lender has verified the preliminary information you provided and obtained a copy of your credit scores.

About the only factor that could affect being pre-approved at this point is the home appraisal. If the selling price is much higher than the appraisal value, you may not get pre-approved.

What are the Steps towards Being Pre-Qualified?

The first step towards buying a home is choosing a lender and paying that lender a visit.

The lender will have you fill out an application and provide personal information such as income, employment and any debts you may have.

Based on this information, the lender will give you a general idea of the probability of you getting a loan.

What are the Steps towards Being Pre-Approved?

The steps towards being pre-approved are very similar to the pre-qualification process, with the difference being that the lender has now verified your information. The lender has verified your employment, income, debt-to-income ratio and obtained a copy of your credit report.

This information tells the lender if you can afford a mortgage, how much you can afford to borrow. If the lender pre-approves you, the lender will write a letter indicating this.

Sellers who see that potential buyers have a pre-qualification or pre-approval letter know that the buyer is serious about buying a home.

While they are both looked upon favorably, the pre-approval letter carries a little more weight because it generally indicates a dollar amount of which you were approved.

This can save both you and the real estate agent a lot of time because they’ll be able to narrow down the search and stay within the approval limits set by the lender when showing you homes.

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What Documentation is Required to Get a Mortgage?

What Documentation is Required to Get a Mortgage?When you’re in the process of seeking a mortgage, there are several pieces of documentation that will be required.

The complete list of requirements is slightly different from one person to the next.

Nevertheless, there are some universal pieces of documentation that are required for all mortgage applicants.

With that in mind, let’s look first at those consistently required and then the specific requirements related to VA loans.

Universally Required Documentation

Filling out a standard mortgage application will alert to the types of documentation expected.

  • The applicant will need to sign an agreement that will allow the lender access to several pieces of the applicant’s personal information.
  • The applicant’s social security number and credit report are the most significant personal data collected once the applicant grants permission.
  • Generally, a month’s worth of pay stubs and two years’ worth of W-2s are also expected.

The lender requires the information related to this disclosure agreement to assess the applicant’s financial and employment history so as to make an informed decision regarding the loan request.

Once all the disclosures have been signed, if a lender approves a mortgage application, more personal information will be gathered from the new client in order to help find the best possible fit among the different options available.

At this time, identification including a driver’s license will be required. Further financial documentation will be necessary in this stage of the mortgage planning process.

These include bank statements, and employment verification.

Documents Relating to the Home

Furthermore, documentation will be required related to the home for which the client seeks the mortgage loan. This paperwork includes

  • the purchase contract
  • a copy of the earnest money deposit check that was written for the real estate transaction
  • preliminary title report
  • proof of any insurance covering the house
  • an asset assessment

Further Documentation May be Required

Depending on the type of mortgage sought and other individual variables, further documentation may also be required.

  • Additional bank statements and pay stubs may be requested.
  • If self-employed or otherwise employed without a W-2, a business license or CPA letter may take the place of the W-2 requirement.
  • Some situations require documentations of a property appraisal.

Documentation Expected for a VA Mortgage Loan

If seeking a mortgage while in military duty, a Statement of Service and Certificate of Eligibility (COE) will be required.

For those not currently serving, a COE is still required; proof of prior military service will be required in the process of making the request for this documentation.

Additionally, the DD-214 is required for those not presently serving in the military.

How to Get Your VA Documents

The Statement of Service can be obtained by contacting the applicable commander, personnel office, or adjutant.

The lender may have access to the Automated Certificate of Eligibility (ACE) system, through which eligibility can be determined via an online application for the COE. Most lenders have access to this ACE system, although ACE can only process eligibility for people that the VA has enough personal information about.

If ACE does not work, then the COE can be obtained through submitting VA form 26-1880 with the request for this certificate to the Winston-Salem Eligibility Center.

Every person seeking a mortgage will need to go through a process that requires much documentation.

The specifics differ from one person to the next. Yet, enough consistency exists among mortgages in general, and especially among specific VA loans that this should help as a guide to know what is needed when applying and meeting with a lender.

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How to Obtain the Lowest Mortgage Interest Rate

Hey Friends!

Ever wondered just how to obtain the lowest mortgage interest rate? If so, you are in luck. Today I am going to share with you some simple steps that will allow you to do just that.

Never in all my years have I had a client come to me and tell me “Jimmy, please give me the highest mortgage interest rate that you have.”

I have however, (multiple times a day) had clients tell me “I want the best interest rate possible” …and you know something, there is absolutely nothing wrong with that.

The truth is that we should all want the lowest mortgage interest rate because it can literally save us tens of thousands of dollars in interest over the life of the loan.

Your Credit Score Affects Your Interest Rate

First off, let’s touch on credit scores. The single greatest factor to obtaining the lowest mortgage interest rate has to be credit score. Simply stated, the higher the credit score, the more competitive the interest rate.

The good news is that if your credit is less than perfect or could use improvement there are multiple ways to increase your score. Contact us at the contact info below for more details.

Higher Down Payment Can Mean a Lower Interest Rate

Now let’s move into down payments. Down payments can help you obtain more competitive interest rates when purchasing a home because the lender may view their investment to you (the money for your home) as less risky. So, it pays (if you can do it) to put money down – ideally 20% if possible.

Now, if you are nowhere close to having a 20% down payment, not to worry as there are multiple loan programs available on the market that will allow you to put as little as 5, 3.5, or even 0% down.

Paying Points for a Lower Rate

Lastly, another way to obtain the lowest interest rate when purchasing a home is paying points.

If you have never heard of the term “paying points” it’s simply this: paying money to the lender at closing to obtain a lower mortgage interest rate over the life of the mortgage loan. This will allow you to have a lower rate of interest over the life of the loan thus allowing you to save money long term.

For more strategies on how to obtain the lowest mortgage interest rate feel free to contact us today at 480-800-8387 or email me at

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How a Renovation Loan for Home Improvement Works

Renovation LoanIf you want to make the move to a new home, you will first have to sell your existing property. You will naturally want to get as high an amount as possible from the sale of your home.

One of the best ways to add a significant amount to the resale value of your home is to take out a renovation loan.

How a Renovation Loan Differs from Other Types of Loans

There are several ways that a renovation loan differs from other types of loans. The chief difference is that most mortgage loans will offer you a financing arrangement that will enable you to borrow a fixed amount of money that is based on the price you paid for the property. Some loan arrangements will go a bit further by allowing you to borrow money based on the actual current market value of your property.

A renovation loan is superior to these other forms of loans in that it will allow you to borrow money based on the projected value of your home after you have completed the proposed improvements. This naturally gives you a higher figure to borrow money based on.

How Does This Type of Loan Usually Work?

In most cases, a renovation loan works similarly to other types of loan arrangement. The process normally begins with a single loan, followed by a single closing at the time the loan is paid off in full. The lender will advance funds to the contractor that you hire for the work. The money will be delivered in installments as each stage of the work is completed.

Purchase Renovation Loan

Home Improvement Loan

There are two very common varieties of renovation loan. The first is known is a purchase renovation loan. This type of loan is perfect for people who wish to begin the work after closing on the purchase of the property in question.

The loan can be provided for both the purchase of the property and the work that will immediately begin on it. A minimum down payment for a purchase renovation loan will usually be about 3 to 5 percent of the projected value of the home once the improvements have been made.

Refinance Renovation Loan

The second major type of renovation loan is known as a refinance renovation loan. It can also be referred to in some cases as a rehab loan. This type of loan is very similar to a purchase renovation loan, with some slight differences.

This loan is the perfect type of loan arrangement for people who already own the property that they desire to renovate in order to increase the value of. Under the terms of this loan arrangement, any prior financing that exists on the property an be paid off while additional funds for the work are provided. Depending on what type of renovations you qualify for, you can borrow up to 100 percent of the value of your home once the work has been completed.

How Do You Apply for a Renovation Loan?

We can help you with that! There are many different agencies that you may apply to in order to receive a this type of loan. DateFannie Mae and the FHA both offer excellent refinance renovation loan programs. Contact us for more details.


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2018 Increase in AZ Mortgage Loan Limits

Have you heard about the three major changes  in mortgage loan limits affecting our housing market?

Mortgage loan limits in AZ have gone up for 2018 across the board on Conventional, FHA, and VA. Here’s the great news…

  1. FHA Loan limits have recently increased from roughly $279,000 all the way up to $294,515, expanding the housing market and the opportunity for you to find the perfect home.
  2. Conventional Loan limits have gone all the way up to $453,100. Why is that a big deal? Previously, if you were above $424,000, you would have been forced into the jumbo financing arena. Now this is not the case – once again allowing you to finance more and perhaps find that perfect home for you.
  3. VA Loan limits have also followed suit with regards to conventional financing, allowing a veteran to finance as much as $453,100 with no money down and no private mortgage insurance required. This makes VA Loans some of the most, if not the most, competitive financing terms available for Veterans in the housing market.
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Why You Need a Loan Specialist

Top Loan SpecialistPurchasing a home is a huge transaction and not one you want to enter into lightly. It can also be an exciting adventure particularly if it’s your first home purchase.

The excitement can quickly fall to the wayside, however, if you’re unfamiliar with the process and find yourself in over your head. Using a loan specialist can make all the difference.

Learn what a loan specialist can do for you and why it may be beneficial to have one when obtaining a mortgage.

What is a Home Loan Specialist?

A home loan specialist is a professional trained in the areas of finance, business and loans.

When you apply for a mortgage, you may find that there is a lot more to the process than you’d anticipated.

Depending on the lender, it can be a simple process, but are you getting the best deal possible?

A loan specialist can not only help get you through the process, but they can help you choose the loan that’s best for you and/or your family.

What many don’t realize is that there are different types of mortgage loans.

FHA Loans – FHA loans are loans that are backed by the Federal Housing Administration.

They do require that you purchase mortgage insurance, but also offer benefits. They typically offer lower interest rates and are available to borrowers with less-than-perfect credit scores.

FHA loans also require only a 3.5 percent down payment. They are an excellent option if you’re a first-time home buyer.

VA Loans – VA loans are mortgage loans available to veterans and their spouses.

They are backed by the Department of Veterans Affairs, so they are also attractive to potential homebuyers or homeowners interested in refinancing their current mortgage loans.

They’re also available to consumers with less-than-perfect credit. The best features of VA loans are that they do not require mortgage insurance and typically don’t require a down payment.

Conventional Loans – Conventional loans are mortgage loans you get through lending institutions like banks, savings and loan, credit unions and private lenders.

They may or may not require mortgage insurance depending if you have at least 20 percent down payment.

Credit scores, home values, down payments and debt-to-income ratios usually determine interest rates.

While conventional loans may appear to be the most unattractive of the three types, there are times they’re the best option. Here again is where a loan specialist can be of great service.

What a Loan Specialist Does for You

Since you’ll probably be making payments on your mortgage for anywhere from 10-30 years, you want to make sure you’re getting the best and most affordable loan.

A loan specialist will assist you with the following.

  • Completing and submitting your documentation
  • Going over the lending process with you
  • Helping you choose the right lender
  • Explaining loan terminology
  • Explaining the different types of mortgage loans
  • Helping you choose the right loan type
  • Assisting you throughout the entire process from the beginning and through the closing

Having a loan specialist working with you can make the difference of a complicated or easy transaction.

It can also leave you with the confidence that you got the best deal and are armed with the information you need regarding your mortgage loan.



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Conventional or FHA? Pros and Cons

Purchasing a home is probably the largest purchase you’ll ever make in your lifetime, so you want to get the best possible mortgage loan terms.

If you’re new to the mortgage loan process, you may be wondering whether an FHA loan or a conventional loan would be best for you. Below is info on both types of loans as well as pros and cons of each.

Difference Between FHA and Conventional Loans

While FHA and conventional loans both involve obtaining financing from lenders to purchase or refinance homes, there are slight differences between the two.

Conventional loans are mortgage loans a homebuyer or potential homebuyer gets from banks, credit unions or private lenders.

In exchange for the loan, the individual makes monthly payments that include both the principal amount and interest.

If the borrower fails to make the payments, the homeowner can lose the home through foreclosure. Both the lender and the borrower can lose their investment.

FHA loans are also mortgage loans that provide the homebuyer with money to purchase a home.

However, one major difference is that FHA loans are backed or guaranteed by the Federal Housing Administration.

With an FHA-backed loan, the lender is required to purchase mortgage insurance, which guarantees that the lender will not lose their investment if the borrower fails to make the payments.

Pros and Cons of FHA Loans


  • Lower down payment required
  • More lenient credit score requirement – consumers can get an FHA loan with credit scores as low as 580.
  • Cash and monetary gifts can be used for down payment
  • Homebuyers who previously lost their homes to foreclosure can still get an FHA loan after improving their credit scores.
  • Seller can provide up to six percent of the money for closing costs.
  • FHA loans allow individuals not living in the home to be co-borrowers.
  • Allow refinancing with lower equity amounts
  • The government backs the loan


  • Requires both monthly mortgage insurance and an upfront mortgage insurance premium.
  • There is a limit of how much a consumer can borrow based on the location of the home.
  • Mortgage insurance is much more expensive than private mortgage insurance that might be required with a conventional loan.
  • The borrower may end up paying more over the life of the loan because of the lower requirements.

Pros and Cons of Conventional Loans


  • Mortgage insurance usually not required
  • More economical for borrowers with good credit scores
  • Borrowers may pay less over time due to no mortgage insurance requirement.
  • Loan fees can be negotiated.


  • Stricter credit score requirement – Consumers must typically have credit scores of at least 600.
  • Higher down payment is required.
  • Sellers may help with closing costs but usually only up to three percent of the amount.
  • They require a certain debt-to-income ratio.
  • Because the lender determines interest rates, they can be higher than with an FHA loan.
  • More criteria goes into determining eligibility if borrower can’t pay at least 20 percent down payment.

What About VA Loans?

Veterans and military personnel also have the option to purchase a home with the help of a VA loan. A VA loan is a mortgage loan that’s backed by the Department of Veterans Affairs. These loans also come with several benefits, including the following.

  • No mortgage insurance required
  • No down payment required
  • Lower interest rates
  • Mortgage is assumable
  • No cap on the amount the homebuyer can borrow




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