But I am Pre-Approved!

What does it mean to be 'pre-approved' for a loan?  Unfortunately, the answer to that question is not easy and varies by lender.

 

It should mean that the lender has visually checked your income, credit, ratios, etc. and based on these facts believes the the buyer will be able to get the loan.  This is a step above the 'pre-qualification' that used to be issued based on a phone call only. Unfortunately, not all lenders do this and issue a pre-approval that is no more than a pre-qualification.

 

Even if you have a valid pre-approval, it does not mean you are guaranteed to get the loan.  During the process your mortgage lender will ask for many documents.  They may ask for letters to explain some circumstance that happened, or some ding on your credit.  Once they have all of your documentation, the appraisal, survey, etc. they will forward all of the documents to their underwriting department.  The underwriter will review all of the documents and compare against their requirements.  At this time it is very likely that they will ask for more documents!  You think you have given them every possible piece of information they could want, but now...

 

When  underwriting has given the OK on the loan they will issue a 'clear to close'.  That is the best news you have heard recently!  However, this does not guarantee your loan is going to close.  At the very last minute the lender will pull your credit again and check very closely for any possible variation from the first report they pulled.  If you went to a car dealer to check into buying a new car the credit inquiry will show up, even if you didn't buy the car.  That may be enough to stop your loan, or at least delay it. Don't buy anything, or have your credit checked for any reason without talking to your lender first to make sure you will be OK.

 

The lender will also likely check your employment again, just before closing.  If there is any change at all, notify your lender.  Even a company name change can stop a loan from being issued.