Can a loan be denied after closing? If you’re looking to buy a home in Ocala, Florida, and plan on using a lender, you might be wondering if your loan could be denied after you’ve closed on your new home.
It’s usually rare for a loan to be denied at this part of the buying process, but it’s technically possible. In this post, our team at Your Home Sold Guaranteed Realty - Coldwell Real Estate Services will discuss five factors that could potentially lead to a loan denial post-closing.
Key Takeaways:
- If your financial situation changes suddenly, for example, a significant loss of income or a large amount of new debt, then your loan could be denied.
- Issues related to the condition of the property can lead to a loan denial after closing. For example, if the property appraisal comes in significantly lower than the purchase price.
- Lenders take fraud and misrepresentation very seriously and may revoke loan approval if they discover evidence of dishonesty or inaccuracies in your loan application.
Can a Loan Be Denied After Closing?
After closing on your home, you’ll go through several steps leading up to the final closing day– the day when you sign all remaining documents and officially pay the seller. During this time, your lender will be working behind the scenes to underwrite your loan and give you official approval, instead of pre-approval.
After reviewing your finances and completing the underwriting process, your lender will mark your loan as “clear to close.” This acknowledges that you’ve met all the requirements to officially obtain your home loan.
Once you’ve reached this stage, you’ll sign a closing disclosure that outlines the terms and conditions of your mortgage. This will allow you to obtain the necessary funds to pay the seller and purchase your new home.
After signing this document, it’s very rare for your loan to be denied. However, it’s still possible to be denied in some situations due to extreme circ*mstances. Below, we’ll cover five situations where a loan denial can occur.
Five Factors Can Cause Your Loan to Be Denied After Closing
Drastic Change in Your Finances
If your financial situation changes suddenly, for example, a significant loss of income or a large amount of new debt, then your loan could be denied. Usually, lenders do a final credit check right before officially funding the loan. If they see any drastic changes, they might take them as signs that you won’t be able to properly repay your mortgage. This could cause them to ultimately deny the loan amount, especially if these financial changes impact the terms of the loan agreement you signed. For this reason, it’s generally advised to avoid taking out a new line of credit or applying for other large loans while buying your new home.
Violating the Loan Terms
After the underwriting process is finished and your loan has been approved, you’ll sign a closing disclosure that outlines the final terms and conditions of the mortgage. These conditions vary from lender to lender but usually include financial requirements and requirements for the condition of the property. While most of this information is verified during the underwriting process, the lender will complete a final check right before issuing the loan. If you fail to satisfy these conditions before the loan closes, the lender may delay the funding until the conditions are met or deny it altogether.
Significant Issues with the Property
In some cases, issues related to the condition of the property can lead to a loan denial after closing. For example, if the property appraisal comes in significantly lower than the purchase price, it could affect the loan-to-value ratio and the lender’s willingness to fund the loan. Similarly, if the property has undisclosed defects or fails to meet certain lender requirements, it could result in a loan denial or delay in funding.
Fraud
Lenders take fraud and misrepresentation very seriously and may revoke loan approval if they discover evidence of dishonesty or inaccuracies in your loan application or supporting documentation. Providing false information about your income, employment, assets, or debts could cause you to face loan denial after closing, as lenders have the right to rescind the loan at any time if fraud is detected.
Legal or Regulatory Issues
Changes in legal or regulatory requirements could also impact the loan approval process and potentially lead to a loan denial after closing. For example, if new regulations are implemented that affect the borrower’s eligibility for the loan or the lender’s ability to fund it.
In the end, closing on a home as well as signing a closing disclosure with your lender do not guarantee your loan will be funded. To avoid the risk of a loan denial after closing, it’s essential to communicate and be proactive with your lender throughout the entire buying process.
Our Team Makes it Risk-Free to Buy a Home in Ocala
Avoiding a loan denial starts with finding a top lender to work with. At Your Home Sold Guaranteed Realty - Coldwell Real Estate Services, Scott Coldwell and our team have close relationships with all the best lenders in Ocala and North Central Florida. We can use our connections to refer you to a lender who fits your needs and financial situation.
We’re the top realtor in Ocala for a reason. Aside from our industry connections, we also offer unique buyer guarantees that make the buying process risk-free. This includes our Buy it Back Guarantee, which gives you the option to return your home in the event you’re unsatisfied with it for any reason.
To learn more about working with Your Home Sold Guaranteed Realty - Coldwell Real Estate Services to buy a house in Ocala or the surrounding areas, call 352-290-3512, or fill out the form on this page.
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