Mortgage Declined after `Agreement in Principle`

If you`re in the market for a mortgage, then you may have heard of an « agreement in principle. » This is a statement from a lender that they would be willing to lend you a certain amount of money based on your financial circumstances. It`s not a guarantee of a mortgage, but it`s a good indication that you would be eligible for one.

However, even if you have received an agreement in principle, your mortgage application can still be declined. This can be frustrating and confusing, especially if you were relying on that agreement to move forward with purchasing a property.

So why might your mortgage be declined after receiving an agreement in principle? Here are some common reasons:

1. Credit issues: Your lender may have checked your credit report before issuing the agreement in principle, but if your circumstances change (e.g. you miss a payment or take on more debt), your credit score could drop. If your credit score falls too low, the lender may no longer be willing to lend you money.

2. Employment changes: If you change jobs or your employment circumstances change (e.g. you switch from full-time to part-time work), your lender may reassess your ability to make mortgage payments. If they feel that your employment is no longer stable, they may decline your application.

3. Property issues: If the property you`re looking to purchase doesn`t meet the lender`s criteria (e.g. it`s in a flood zone), they may decline your application.

4. Affordability issues: Even if you were pre-approved for a certain amount, the lender may reassess your ability to afford the mortgage based on changes in your circumstances (e.g. a decrease in income).

If your mortgage is declined after receiving an agreement in principle, it can be frustrating, but it`s not the end of the road. You may be able to address the issues that led to the decline and reapply for a mortgage at a later date.

It`s important to note that receiving an agreement in principle does not mean that you`re guaranteed a mortgage. It`s simply an indication that you`re likely to be eligible for one based on your financial circumstances at the time. If your circumstances change, it`s possible that your eligibility could also change.

If your mortgage is declined, don`t be afraid to ask your lender for more information about why. This can help you understand what you need to do in order to become eligible for a mortgage in the future. And remember, there are other lenders out there who may be willing to lend to you even if one has declined your application.

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