Yes, a loan can be denied after approval, but it rarely happens. It’s more common for a loan to be denied after preapproval, which is a preliminary process that you can use to estimate how much you can borrow and what rates you may qualify for. Preapproval doesn’t guarantee that you’ll be approved for a loan, and it’s possible for your financial situation to change after being preapproved.
Loans that have a lengthier application and approval process, such as mortgages, are most likely to be subject to denial even after being approved because there’s more time for things to change before the loan is finalized. Another type of loan that can be denied after “approval” is an auto loan. It’s possible that the dealership could let a customer drive off the lot with a car before their loan is finalized. If the dealership can’t secure the loan, they may ask the customer to bring the vehicle back to the dealership.
Keep in mind that being denied for a loan after approval is a rare occurrence. As long as the information on your loan application is accurate and your financial situation doesn’t change for the worse during the approval process, you should be in the clear.
This answer was first published on 01/30/23. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
If one or more late payments or collections show up on a credit report after you've already been approved, your credit score could drop below the minimum required for your loan, and your loan could be denied.
Can a lender back out after approval? ›
You have signed all the papers necessary and have reached an agreement. Your lender is bound by law to stick to your contract. After closing, your lender cannot go back on the arrangement they have made with you. Your loan can be denied anytime from the point of application to the point of closing.
Can a loan be cancelled after approval? ›
Yes, you can cancel a personal loan after approval. But it is advisable to do so before disbursem*nt to avoid additional fees. Check your loan agreement for any specific cancellation terms and conditions.
How likely is it to get denied after pre-approval? ›
What are my chances of getting denied after preapproval?
| Loan program and purpose | Closing rate |
|---|
| Conventional refinance | 79% |
| Conventional purchase | 80% |
| FHA refinance | 65% |
| FHA purchase | 78% |
2 more rowsWhile this may sound like the stuff of stress nightmares, the truth is, it happens. Even buyers approved for a mortgage may have their approval withdrawn just a few days before closing, or even once construction of their new home has begun.
Can a loan be denied after being approved? ›
If one or more late payments or collections show up on a credit report after you've already been approved, your credit score could drop below the minimum required for your loan, and your loan could be denied.
Can a lender cancel a loan after signing? ›
Personal loans can often be canceled if they're not yet approved and the agreement hasn't been signed. However, once the agreement is signed, you're in a binding contract.
Can a loan fall through after pre-approval? ›
If the conditions in your preapproval letter are not met, your loan could fall through. To protect yourself from incurring any losses if your preapproval is voided, make sure any purchase agreement you sign includes a contingency covering your earnest money.
Can an underwriter deny a loan after pre-approval? ›
Getting preapproved for a mortgage doesn't guarantee a future clear-to-close decision from the underwriter. This type of approval is sometimes based on basic information you provide and usually requires deeper verification of all information reviewed.
Can a loan be denied after clear to close? ›
Yes, you could get denied after you've been cleared to close. In the days leading up to your closing, do your best to make sure nothing happens that makes you look like a riskier borrower. Your safest bet is to avoid making any financial moves during this period, such as: Apply for any new credit cards or loans.
Yes, it can. Although extremely rare, a home loan can be denied after unconditional approval due to certain circ*mstances. The formal approval letter from your lender typically includes terms and conditions such as 'subject to further bank requirements' to enforce it.
What happens after lender approval? ›
Once your loan is approved, you will get a commitment letter from the lender. This document outlines the loan terms and your mortgage agreement. Your monthly costs and the annual percentage rate on your loan will be available for review. Any conditions that must be met before closing will also be documented.
Do lenders check credit after final approval? ›
Within a few days of closing a lender may update your credit inquiries to see if your credit has been pulled during the home loan process and will ask you for an explanation (and potentially for documentation) for these inquiries and if any new credit that was opened during that time.
Can you lose a mortgage after approval? ›
Yes, changes to your financial situation after you get pre-approved for a mortgage can lead to loan denial. What financial changes should I avoid after getting pre-approved?
Can I decline a loan after approval? ›
Can you decline an approved loan? Yes, you can decline an approved loan. Simply reach out to the lender and politely explain that you no longer wish to follow through with their loan at this time.
Can a lender pull out after mortgage offer? ›
If the details you provided on your application are no longer correct due to a change in circ*mstances, such as a job loss or significant increase to your outgoings, the lender may decide to withdraw the mortgage offer. At the very least, they might adjust the terms of your offer to reflect your new affordability.
