Categories: Mortgage and Housing

Can a Mortgage Be Denied After Closing?

There are many questions that people who are about to buy a home must ask. For one thing, can a mortgage be denied after closing? It’s a question of fact and it depends. Depending on the mortgage company and the lender, not all mortgages can be approved. Before you even ask that question, you need to understand the way mortgages work.

Closing is the last step before a homeowner is able to take possession of their new home. Closing costs are covered by the mortgage, so a lender must make a profit off of the loan. The lender must subtract any fees from the final price of the house in order to make a profit. Sometimes, the lender will request that you pay all or part of the closing costs.

Down Payment

The lender may require that you add a down payment to your loan. This means that you must shell out a specific percentage of the total cost of the house. This down payment will be applied to the principle of the loan. Banks and other lending institutions typically allow no money down loans. If you have a lot of money to put down, you may be able to get a loan that requires a down payment.

Credit History

A loan officer may look at your credit history before approving your loan. If you have bad credit, this could mean that you’ll be paying a higher interest rate on your mortgage. Good credit will get you better terms on your loan. However, even if you have good credit, there are instances when a bank or private lending institution might still think that you have poor credit. If they do, you’ll probably have to pay a higher interest rate on your loan.

Demographics

Sometimes the lender will request demographic information about you when deciding whether or not to approve your request. For example, they’ll ask about your marital status, the ages of your parents, the number of children you plan on having, the amount of income you bring in each year, and whether or not you’re disabled. Some lenders go as far as to ask about your home environment. Does it lend itself to theft, fire hazards, and similar problems? If so, you may need to explain to them why your property would not be a good fit for your new family.

Property Type

Does your lender really need to know the type of property you live in (two-story ranch house versus two-story ranch apartment)? Some lenders will deny a loan request based on the type of residence you have. Others, however, may not have this option available. If you have a duplex with three units, for example, you may want to explain this to your lender.

Credit Score

Does your credit score affect your mortgage approval or denial? Some lenders may view a low credit score as a negative, especially if you’ve had some financial difficulties in the past. If your credit score is low, you may want to work on that score and rev up your numbers before you apply for a home loan. A lender may look positively on you if you have good employment history and a current bank account.

The home is something you’ll be living in for the rest of your life. If you want to purchase a home, you may want to look at whether or not you can get approved for a loan. A lender may deny your mortgage request based on one of these reasons, so you’ll definitely want to make sure that you’ve explored all your options. You may also want to look over your lender’s FAQs to see if there are any other rules you should be aware of.

Riley Allen

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