Why Did My Preapproval Amount Change?

Mortgage preapproval and prequalification help you understand how much you can borrow and what your mortgage terms will be. This makes your home search easier.

A preapproval letter or prequalification letter can also be important when you make an offer on your home. It provides proof that you're likely to be able to close on a mortgage and complete the sale.

However, prequalification and preapproval are not a guarantee that you will be able to borrow the amount you expect. There are many reasons your preapproval amount can change, and you should understand them so you can avoid mistakes during the homebuying process.

Here's what you need to know.

Can Mortgage Preapproval or Prequalification Amounts Change?

Mortgage preapproval and prequalification amounts can change.

They are based on the amount your lender believes you can qualify to borrow at the time you apply. Because circumstances can change before you actually make your home purchase, your final approval amount could differ.

You should understand the kinds of things that could cause your preapproval or prequalification amount to change. That way, you won't make decisions when buying a home that introduce unexpected hurdles in the final mortgage approval process.

Reasons Mortgage Preapproval or Prequalification Amounts Can Change

Here are some of the most common factors that could affect your prequalification or preapproval amount.

1. Your Credit Score

Your lender considers your credit score when prequalifying or preapproving you for a mortgage loan.

If new information is posted to your credit report that causes a major change in your score, your lender may need to re-evaluate your application using the updated score. This could impact the amount you are approved to borrow.

For example, if you have always paid bills on time but you stop paying your current credit card or home loan and go into default, this can dramatically lower your credit score.

Your lender may need to adjust the amount they can lend you, your qualifying mortgage rate, or both, based on the qualifying requirements of the loan type you chose.

2. Your Job Situation

Lenders look at your income and the stability of your career when they decide how much you can borrow. If you have not maintained stable employment and income over the past two years, and did not share that information during your preapproval or prequalification, your lender may not be able to lend to you.

3. New Debt

Your debt-to-income ratio is also an important factor when you get prequalified or preapproved. Lenders want to make sure your total debt payments, including your new mortgage loan, do not take up too large a percentage of your income.

If you take on new debt while shopping for a home, this can affect your DTI ratio and potentially change the amount you're allowed to borrow for your home.

This is a key reason why homebuyers who are in the midst of the loan approval process should avoid getting a car loan, applying for a new credit card, cosigning a loan for someone else, or financing any major new purchases.

4. Your Co-Signer

If you are getting a mortgage with a co-signer, when your lender preapproved or prequalified you, they did so by considering both your credentials and the co-signer's credentials.

If your co-borrower or co-signer's financial circumstances change, this may also affect the amount you are allowed to borrow. Depending on the change, your lender may be forced to lend you less.

5. Interest Rate Fluctuations

Interest rates affect the cost of borrowing. If interest rates change and your rate was not locked in, then a change in market rates will likely mean that your loan rate changes.

Because your mortgage rate will affect your monthly payment, the amount you are prequalified or preapproved for may be reduced if your new payment is no longer considered affordable.

6. Loan Program Changes

There are different kinds of loan programs, with their own qualifying requirements. If a program you are participating in changes its terms or rules, this could affect the amount that you are allowed to borrow.

7. Property Taxes, Homeowners Insurance, and HOA Fees

Mortgage lenders don't just consider the cost of the home loan. Your property taxes, homeowners insurance, and HOA fees are also factors in determining if your loan is affordable.

If the home you want to purchase has higher property taxes, insurance, or HOA fees than expected, you may qualify for a smaller mortgage than the amount you were prequalified or preapproved for.

8. Appraised Value

Finally, your appraised value is also a factor. Lenders often prequalify or preapprove you before you have found a specific home. Once you find a house, your lender must make sure the amount you're borrowing fits within its maximum loan-to-value guidelines. If the home appraises for less than expected, this could mean you're approved to borrow less.

Can I Change My Preapproval or Prequalification Amount?

In some cases, you may want to increase your mortgage preapproval amount or prequalification amount. This may be the case if you want to purchase a more expensive home that will require you to borrow more than you initially told your lender.

While you can request an increase to cover the added costs, you must financially qualify for that request to be approved.

On the other hand, in some cases, you may also want to be strategic about getting a prequalification or preapproval letter. You can request that your lender provide a letter stating you are approved for less than the actual amount that you can submit with an offer to buy a home.

For example, if you're approved for $450,000 but making a $400,000 offer, you can request that your lender provide a prequalification or preapproval letter for $400,000. That way, you won't alert the seller that you're qualified to borrow more.

Preapproval and Prequalification Amount FAQs

If you still need to know more, here are the answers to some frequently asked questions about preapproval or prequalification.

Can I Keep My Preapproval or Prequalification Amount If It Expires?

It's important to know how long mortgage approval lasts or how long your prequalification lasts. If it expires, you may need to submit additional financial documentation to get the deadline extended.

What Shouldn’t You Do After Preapproval or Prequalification for a Mortgage?

Avoid making any major changes to your financial situation after a mortgage preapproval or prequalification. This includes changing your job or taking on more debt. When your financial credentials change, this can affect your ability to borrow the expected amount.

Can You Borrow More Than Your Preapproval or Prequalification Amount?

You can borrow more than your preapproval or prequalification amount if you ask your lender to approve you for a higher loan amount and if your financial credentials, including your credit score, debt-to-income ratio, and loan-to-value ratio, support a higher borrowing amount.

Final Thoughts: Understanding Changes to Your Preapproval or Prequalification Amount

When your mortgage preapproval or prequalification amount changes, your ability to move forward with a home purchase can be affected.

Be sure you understand how the loan approval process works and avoid making changes to your finances after you're prequalified or preapproved.

If you aren't yet prequalified or if you have questions about borrowing to buy a home, reach out to Freedom Mortgage today to get prequalified and take the first important step in your homebuying journey.