FHA loan approval

2 Replies

Hey guys,

I have finally gotten the ball rolling on my dreams of RE investing. I recently got pre approved for a fha loan. I also put in a contract on a duplex. I have paid my ernest money, now i will be having the property inspected this week. My main concern since this is my first time, what are the chances of being denied the loan after pre approval. Im really excited about this experience, and I don't want to get my hopes up and have them crushed. 

Thanks in advance.

Hey @Darrian Whitford . Your first purchase can be nerve-wracking. 

The quick answer to your question is yes, you can be turned down for a loan even after they pre-approve you. Did you put a mortgage contingency into the contract? This contingency says that if you cannot obtain financing at a reasonable rate (which would be spelled out in the contract) then the contract will be terminated and you will get your earnest money back. If you do not have this contingency, and you cannot get a mortgage, the seller can keep your earnest money. There are other ways out of the contract, such as issues during the inspection if you put an inspection contingency into the contract. If you waived the inspection contingency, you would not be able to cancel the contract after that, either, without losing your earnest money. 

Pre-approval means almost nothing - the lender has done a very basic check on your credit-worthiness and decided that based on the information you gave them, you qualify for the next step of a more in-depth credit check. If you told them you have a job that pays $15,000 a month, but really you make $1,000 a month, they probably won't approve your loan. 

So as long as the information you gave them is correct, you will move to the next stage. Make sure you don't have any large expenditures that are not easily explained before you get your loan. Don't go out and buy a new car, or open additional credit cards, or anything like that. Food and gas are fine, but try to limit what you are spending. Don't give them any reason to question any of your expenses. They will ask for bank account statements, and will go through them, looking for odd transactions. They want to make sure you will be able to pay your loan.

When they ask for additional information, and they will, get it to them as fast as humanly possible. 

Congratulations on getting your first property under contract. Keep us posted and Good Luck!

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