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6 Reasons Your Mortgage Application Could be Rejected

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If you’ve followed your broker’s advice and gotten pre-approved before starting your home hunt, you’re on the right track. However, just because you have a good credit score and a pre-approval in hand doesn’t guarantee your mortgage application will be accepted during the final stages of screening. Here are six reasons why you could still get rejected for a mortgage, despite having good credit. Detailed knowledge on lending criteria will help you protect yourself against unpleasant surprises once you’ve found your dream home.

Related: 10 Things You Should Know Before Getting a Mortgage >>

The mortgage rules change

Occasionally, the bank or the government will decided to change its rules for granting loans, which may reduce or remove your buyer power. There is not much a buyer can do about this, except keep up to date on the latest federal and local legislations. Did you know that as of November 2016, new mortgage laws apply to buyers in Montreal?

Related: 3 Questions to Ask your Mortgage Lender >> 

Your debts increase after applying for a pre-approval

It’s crucial not to make any large purchases in the time between applying for a pre-approval and completing the purchase of your home. Buying a new car or taking on a student loan during this time will increase your debt-to-income ratio, and may push you over the acceptable limit for a mortgage loan.

Calculate your mortgage costs: download our free ROI calculator for investors

You switch jobs or careers

If you’ve been dreaming of quitting your job to start your own business, now is not the time. Wait until you have your keys in hand before you make any changes to your declared source of income.

Related: How to Get a Mortgage if You’re Self Employed >>

You ask for more than the assessed amount

After you make an offer on a home, the bank will send a certified appraiser to verify that your offer is in line with the home’s market value. If your lender deems that your offer exceeds the market value, they will deny your loan unless you increase your downpayment to match the difference. This is why it’s crucial to conduct a professional CMA before putting in an offer on a home, which most brokers will offer for free.

Incorrect information on your loan application

It goes without saying that if the bank discovers false or misleading information on your loan application, your mortgage will be denied. Make sure that all your documents are up to code and presented in the right format.

Undisclosed business losses or previous bankruptcies

Failing to disclose past bankruptcy, foreclosure, or short sales in your business can lead to your mortgage being rejected. Glitches in your credit history will stay on your records for 7 years, and the older they are the less likely they are to affect your application. However, if a lender decides that your mistake is significant enough to compromise your trustworthiness as a borrower, your loan could be rejected at the last minute.

In conclusion, always keep these 6 points in mind after applying for a loan:

  • Keep an eye on your local news sources to make sure you’re up to date on the latest mortgage rules
  • Don’t change your debt to income ratio by making large purchases or applying for other loans.
  • Don’t quit your day job.
  • Conduct a CMA before putting in an offer on a home
  • Be as transparent as possible on your credit application
  • Speak to a credit specialist if you have a foreclosure or bankruptcy in your credit history.


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    1. Shupilov Real Estate Team says

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