Can My Lender Decline My Mortgage by Mistake?

We have been informing, educating, and empowering consumers on this website for almost 10 years now.

We get tens of thousands of people from all over the Country that visit this site every month.  We also take hundreds of questions, chats and emails from people like you that have had a horrible experience with their lender.

How can this possibly happen?  Why does one lender say that I am approved, when another lender tells me that I cannot be approved?

How can a lender tell me that I am approved, and then decline the loan at the last minute after I’ve already spent money on inspections and appraisals?

As much as good sales people and massive marketing and advertising budgets would like you to believe, getting qualified for a mortgage is not nearly as simple as pushing a button.

First, you are relying on the loan officer knowing the guidelines, asking for the right information and explanations.

Next, you are counting on an underwriter that also knows the guidelines, and asks for the right information and explanations.

Finally, you have count on the lender being willing to work with someone in your situation.  Not all lenders interpret underwriting guidelines the same way.  Not all lenders offer all loan programs.  Not all lenders hire experienced staff.  Not all lenders are looking out for your best interest above their own profits.

All lenders are not created equal.

Big Box Lenders vs Independent Brokers

Big box lenders are by far the most “popular”.  They are big box lenders because they spend millions of dollars to make you believe that they are the best option for giving you the best loan, at the best rates and fees.

The problem with big box lenders is that they offset the millions spent on advertising by hiring less experienced, lower paid staff.  These big box lenders make their money off of a high volume of loans.

The return on their advertising investment depends on having the lowest costs, and getting the most people to complete an application or online lead form.

If I spent a million dollars to tell you that getting qualified is not easy, and that there are a lot of moving parts, and that there is no such thing as a “one size fits all” solution to your uniquely personal financial situation, would you be eager to call me?

I’m going to go out on a limb and say that most people will not call me.  But they do.  I take live chats, emails and phone calls every single day from folks that “try” to work with a big box lender only to find out that they do not fit into the little box that big box lenders need you to fall into.

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Independent brokers like myself tend to depend more on our experience and expertise to survive in a very tough business where our competition (big box lenders) are willing to mislead and lie to consumers all day, every day, in an effort to make qualifying for a mortgage as easy as getting ordering a happy meal at McDonalds.

I’m not saying that all big box lenders are bad.  I’m also not saying that all independent brokers are good.  This is a very broad observation based on my personal experience helping consumers that have had bad experiences with other lenders and loan officers.

What I am saying is that the fundamental values of big box lenders verses a small business owner can be completely different.  Small businesses tend to depend more on great service, while big box lenders depend more on a high volume of easy loans to pay for their advertising budgets.

Lender Mistakes

Mistakes happen.  I don’t believe for one second that any lender or loan officer is out there purposely misleading or lying to consumers.  That simply doesn’t make sense.

The biggest challenges that I guide folks through every day is typically simple mistakes that loan officers make at the beginning of the process.

Your first point of contact should be a licensed loan officer.  This loan officer is responsible for listening to your needs, wants and financial goals, and determining the best path toward accomplishing this for you.

If you are calling a lender that puts more money into marketing than they do to pay for experienced and professional loan officers, your likelihood of a disappointing experience increases exponentially.

If you are applying for a Conventional loan, the Fannie Mae underwriting guidelines are almost 2,000 pages.  That doesn’t include Freddie Mac underwriting guidelines that introduce many variations to Fannie Mae conventional guidelines.

If you are applying for a FHA loan, your loan officer needs to be familiar with over 1,000 pages of underwriting guidelines to research any unique nuances to your personal financial situation.

Can mistakes happen?  YES.  Was that emphatic enough?  I can’t really increase the font size anymore, so I’ll just say it again…YES, YES, YES.

Whether loan officers and underwriters are lazy, inexperienced, or simply make an honest mistake, there is a lot of room for inaccuracies and oversights with the amount of rules, guidelines and people involved in the process of lending you hundreds of thousands of dollars to buy a home.

When You’re Good, You’re Great

The best loan officers I know have the experience, ability, and respect of their underwriting staff to push through the challenges that can come up.

The best loan officers I know can “see around corners” and know how to ask the questions that inexperienced loan officers don’t know to ask.

The best loan officers I know are constantly researching the underwriting guidelines and trying to prevent the underwriter from having to figure out your situation on their own.

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The best loan officers I know can identify quickly when an underwriter makes a mistake and asks for something that they don’t really need, or turns down a loan by mistake.

Can underwriters make mistakes?  That is another resounding YES.

I’m not saying that getting a home mortgage is as difficult as brain surgery or rocket science, but if you have a particularly unique or difficult situation, you want brain surgeon or rocket scientist on your side to help you survive the experience.

The best loan officers I know are not only good at what they do, they are GREAT at what they do.  They love what they do.  They are challenged by difficult situations.  They are passionate about helping folks that other lenders do not want to work with because your financial situation is not “perfect”.

Need a Second Opinion?

You can catch us most days taking questions through live chat on the lower right corner of this article, or answering questions in the comment section below.

Please feel free to ask any questions below, on chat, or by email.

This is a great opportunity for you to anonymously ask an experienced professional that has no financial interest in how how your question is answered.