Why Was My Mortgage Denied After Pre-Approval? 8 Reasons & How to Fix Them Fast in 2025

1. You Changed Jobs or Lost Your Job

Lenders verify employment right before closing. If you switched jobs, got laid off, or went from W-2 to 1099 (self-employed), your income stability is now in question.

Fix: If you switched to a similar role with equal or higher pay, provide an offer letter and first paystub. If you went self-employed, you will need 2 years of tax returns—meaning you will have to wait. If you lost your job, pause the home search and rebuild income stability first.

Prevention: Do NOT change jobs during the mortgage process. Wait until after closing.

2. You Took On New Debt

Bought a car? Opened a new credit card? Financed furniture for your new house? Congratulations—you just tanked your debt-to-income (DTI) ratio and possibly your credit score.

Fix: Pay off the new debt immediately if possible. If you cannot, ask the lender if you can still qualify with the higher DTI. Some lenders allow up to 50% DTI with strong credit.

Prevention: Do NOT finance ANYTHING between pre-approval and closing. No cars, no furniture, no credit cards. Wait until after you have keys in hand.

If your DTI is borderline, shop lenders who specialize in higher DTI approvals.

3. Your Credit Score Dropped

Pre-approval uses a soft pull or initial hard pull. Final underwriting pulls your credit again. If your score dropped 20+ points, you may no longer qualify—or your rate just got worse.

Common causes: Maxed out credit card, missed payment, new credit inquiry, or high utilization (above 30%).

Fix: Pay down credit card balances below 30% utilization immediately. Dispute any errors on your credit report. If you missed a payment, write a letter of explanation and show proof of on-time payments since.

Prevention: Do not max out cards, miss payments, or apply for new credit. Check your credit score weekly during the mortgage process with free credit monitoring tools.

4. The Home Appraisal Came In Low

You offered $400,000. The appraisal came back at $380,000. The lender will only finance based on the lower number—meaning you need an extra $20,000 in cash or the deal falls apart.

Fix: Renegotiate the price with the seller, bring extra cash to close, or challenge the appraisal with comparable sales data. Some lenders allow a second appraisal.

Prevention: Include an appraisal contingency in your offer. This lets you walk away or renegotiate if the appraisal comes in low. For more strategies, see our guide on what to do when your appraisal is lower than the purchase price.

5. You Did Not Provide Required Documentation

Underwriters need proof of everything: income, assets, employment, debts. If you are missing bank statements, tax returns, or pay stubs—or if there are unexplained deposits—your file gets flagged.

Fix: Provide every document requested within 24-48 hours. If you have large deposits, provide a paper trail (gift letter, bonus letter, etc.).

Prevention: Organize documents early. Keep 2 months of bank statements, 2 years of tax returns, and 30 days of pay stubs ready to upload instantly.

6. The Property Did Not Meet Loan Requirements

FHA, VA, and USDA loans have strict property standards. If the home has structural issues, peeling paint (FHA), or is in a non-approved condo building, the loan gets denied.

Fix: Ask the seller to make repairs before closing, or switch to a conventional loan (which has fewer property restrictions).

Prevention: Get a pre-inspection before making an offer. If you are using FHA/VA, make sure the property meets program guidelines.

7. Your Loan-to-Value (LTV) Ratio Is Too High

If you are putting down less than 20%, your LTV is above 80%. Some lenders have stricter LTV limits, especially for condos, investment properties, or borrowers with lower credit scores.

Fix: Increase your down payment, or shop lenders who allow higher LTV ratios (FHA allows 96.5% LTV with 3.5% down).

Prevention: Ask your lender upfront what LTV they allow for your situation. If you are borderline, get backup pre-approvals from lenders with flexible LTV guidelines.

8. Something Changed With Your Income

If you are self-employed, commission-based, or have variable income, underwriters scrutinize your tax returns and bank statements. If your income dropped year-over-year, or you took big tax write-offs, your qualifying income may be lower than expected.

Fix: Provide a profit-and-loss statement showing current income. Some lenders use bank statement loans (12-24 months of deposits) instead of tax returns for self-employed borrowers.

Prevention: If you are self-employed, work with a lender who specializes in self-employed mortgages. See our guide on how to get approved for a mortgage when you are self-employed.