Can You Be Denied a Mortgage After a Prequalification?

The prequalification process may not uncover problems that can lead to a mortgage denial.
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Homebuyers are often encouraged to seek a mortgage prequalification as part of the house-hunting process. Think of a prequalification as an estimate -- not a guarantee -- of how much you may be able to borrow for a house. Much of the information lenders use to create a prequalification isn’t verified. They usually reserve full verifications for the official mortgage application process. Those verifications might reveal unfavorable information that would cause a lender to deny your application even if you have a prequalification.

Getting Prequalified

A lender prequalifies you for a mortgage by asking for information about your employment, income, debts and down payment amount. The lender sends a prequalification letter if it’s determined that you could qualify for a mortgage. Expect the letter to include several disclaimers. For example, your letter may say that your mortgage approval is subject to a review of your credit history, as well as your co-borrower's. Disclaimers make the prequalification letter nonbinding, so the lender isn’t obligated to approve a mortgage for you.

Loan Criteria

The criteria you have to meet to get a mortgage are based on the type of loan you choose. A conventional loan, for example, has different qualifying requirements than a loan backed by the U.S. Federal Housing Administration. Lenders can turn down your mortgage after you’re prequalified if you don’t meet the credit and income criteria for the loan you want.

Verification Pitfalls

Lenders can reject a mortgage application even if all of the information provided for the prequalification is verifiable. For instance, a couple may include wages from a sideline job as part of their household income. The lender may not count those wages as a reliable source of income if the work is sporadic. As a result, the couple's combined income may not be enough to qualify for a mortgage.

Value of a Prequalification

A prequalification also can alert you to problems early on that will keep you from getting a mortgage. For instance, spouses may discover they need a bigger down payment or that they have too much debt to qualify for a home loan. A prequalification letter also shows sellers that you're a serious buyer who potentially can afford to purchase a home. That may put you ahead of competing homebuyers.


A preapproval can give you a more realistic picture of your financial situation and ability to qualify for a mortgage. Unlike a prequalification, a lender will check your credit rating and verify your employment, income and assets for a preapproval. Expect a lender to charge a fee for the extra work. A preapproval letter makes a stronger statement about a homebuyer’s creditworthiness because it shows that a buyer is approved for a certain mortgage amount for a specified period.

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