Wondering if a loan can be denied after closing? While it’s rare, it is possible for a loan to be denied during the closing process. If you’re in the middle of buying a Houston house, it’s important to know what factors can cause a loan to be denied.
In this post, our experts at Your Home Sold Guaranteed Realty - Chris Schmidt Team will explore six reasons why your lender could deny your loan. That way, you can make informed decisions and ensure the buying process goes as smoothly as possible.
Key Takeaways:
- Yes, it’s technically possible for your loan to be denied after closing. However, it’s very rare for this to happen, especially if you already have pre-approval.
- Significant changes to your financial situation, such as losing your job, a reduction in income, or issues with your credit score could lead to a loan denial.
- Changes to the loan terms or conditions, such as a significant increase in the interest rate or adjustment to the loan amount, could lead to a denial if you no longer meet the lender’s criteria.
Can a Loan Be Denied After Closing?
Yes, it’s technically possible for your loan to be denied after closing. However, it’s very rare for this to happen, especially if you already have pre-approval.
Once your offer for the home is accepted by the seller, you’ll move into the closing process. A key part of the closing process is working with your lender to finish underwriting your loan, approve your loan application, and finalize the details of your mortgage.
If everything with the lender goes smoothly, then your loan will be marked as “clear to close” and you’ll officially receive your home loan. However, if the lender encounters any issues, it could lead to your loan being denied.
What Factors Can Cause a Loan to Be Denied After Closing?
- Major Changes in Your Finances: Significant changes to your financial situation, such as losing your job, a reduction in income, accumulation of a large amount of debt, or issues with your credit score could lead to a loan denial.
- Issues with the Property Appraisal: If the property appraises for significantly less than its asking price, the lender may reconsider issuing the loan. In this instance, you’ll likely have to go back and negotiate a different price with the seller if you want the loan.
- Title Issues: If any issues come up during the title search, such as liens, encumbrances, or ownership disputes could prevent the loan from being approved.
- Changes in Loan Terms: Changes to the loan terms or conditions, such as a significant increase in the interest rate or adjustment to the loan amount, could lead to a denial if you no longer meet the lender’s criteria. Even if you have pre-approval, it’s still possible for mortgage interest rates to increase. To avoid this happening, ask your lender about their mortgage rate lock options.
- Fraud or Misrepresentation: If the lender discovers evidence of fraud or misrepresentation on your part or from other parties involved in the transaction, they could deny your loan.
- Changes in Legal Regulations: Changes to lending regulations or guidelines imposed by government agencies could impact the lender’s decision to approve or deny the loan, especially if the changes affect your eligibility or the lender’s risk assessment.
Work With Chris Schmidt For a Stress-Free Buying Experience
If you want to connect with the best lenders in Houston, get in touch with Chris Schmidt and our team at Your Home Sold Guaranteed Realty - Chris Schmidt Team. We’ve been regularly ranked as the best realtor in Houston and throughout our years in the industry, we’ve developed a large network of professionals we regularly partner with, including lenders.
In addition, we have in-depth knowledge of the local housing market and unique buyer guarantees, including our Buy it Back Guarantee.
If you are interested in working with our team to buy a home, call or text today at 713-322-5604. You can also use the form below. Don’t have to wait to find your dream home in Houston!
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