4 Things That Could Derail Your Mortgage After Pre-Approval

Updated July 19, 2021 - First published on Jan. 10, 2021

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Mortgage pre-approval doesn't always mean you're guaranteed the ability to borrow.

When you're shopping for a home, getting mortgage pre-approval is an important part of the process. Most sellers will require you to include a pre-approval letter with any offer you make to prove you're a serious, well-qualified borrower. Getting pre-approved also helps you better understand how much you'll be allowed to borrow.

But while the term "pre-approval" may make you think you're guaranteed to be approved for a loan, that's not necessarily the case. The process does involve providing a lot of information, and lenders will take an in-depth look at your finances when deciding whether to grant pre-approval. But even when you get it, the lender isn't 100% committed to giving you a loan.

In fact, a number of things could go wrong before closing. Here are four things that could kill your chances of securing a mortgage that you thought was a sure thing.

1. A drop in income

Your income is one of the most important factors that lenders consider when deciding if you should be approved. After all, they want to be sure you can afford the payments and that you aren't getting in over your head with borrowing.

Obviously, when you request pre-approval, lenders base their decision on your income at the time. But job losses can happen, as can job changes or reductions in hours.

More: Check out our picks for the best mortgage lenders

Before final approval, your lender will want to see proof of recent earnings to make sure your income hasn't declined. If it has, there's a substantial chance you won't be able to get the mortgage.

2. A reduction in your credit score

Your credit score is another extremely important deciding factor in whether you can qualify for a home loan or not. Unfortunately, that means a reduction in your score could lead to a pre-approved loan offer being rescinded.

Your score may drop a small amount if you get hard credit checks when shopping for a mortgage loan. That said, the best mortgage lenders will let you compare rates without an inquiry on your credit report. This minor drop isn't likely to have any impact on your ability to borrow. But if you miss a credit card payment, or other negative information posts to your credit record and your score goes down substantially, this almost certainly will derail your efforts to borrow.

3. An increase in your debt

When mortgage lenders look at your income, they also want to see how much of it is devoted to debt payment. As a result, they'll look at your debt-to-income ratio (DTI). If that ratio creeps up too high (factoring in your new mortgage payment), you'll find yourself cut off from borrowing.

If your debt was low enough at the time of applying that you fell below the mortgage lender's DTI cutoff but you've since borrowed more money, you may no longer qualify for the loan. Depending on how close you were to the DTI limit, it may not take much to put you over that line so you can't borrow.

4. A problem with your appraisal

Finally, lenders also consider the appraised value of the home you're hoping to purchase when deciding whether to approve your loan. Obviously, they want to ensure the home is worth enough that it secures the loan.

If your house appraises for less than you offered, this may affect your loan-to-value ratio (the amount you're borrowing relative to what the property is worth). If your loan-to-value ratio gets too high, you'd either need to make a larger down payment or your loan would fall through.

Obviously, losing your ability to buy a home because of a drop in credit, a drop in income, an increase in debt, or an appraisal issue can be frustrating. Fortunately, you can avoid most of these problems by not borrowing more before closing on your loan, making a sizable down payment, and keeping your credit and income steady during the buying process.

In other words, try to maintain the status quo as much as possible until you're all set up in your new home with a mortgage loan from the lender of your choosing.

Our Research Expert

Christy Bieber

Christy Bieber is a personal finance and legal writer with more than a decade of experience. Her work has been featured on major outlets including MSN Money, CNBC, and USA Today.

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Here's How a $10K Withdrawal From Your Bank Could Cause You Financial Problems

By: Steven Porrello | Updated Sept. 29, 2023 - First published on Sept. 29, 2023

Withdrawing money from your checking or savings account may not seem like a suspicious activity. After all, it's your money. Even if it's a large amount, like $10,000, who's to say withdrawing it would call for an investigation?Turns out, withdrawing $10,000 or more from your checking or savings will prompt your bank to file a report with the Financial Crimes Enforcement Unit (FinCEN). It sounds more serious than it actually is, but if you withdraw $10,000 frequently enough -- or worse: break up $10,000 into smaller withdrawals -- you could find yourself under legal scrutiny. To avoid any problems with FinCEN, here's what you should know.Why banks report withdrawals of $10,000 or moreEver since the Bank Secrecy Act of 1970, banks have been required to report any transaction involving $10,000 or more to the federal government, whether it's a cash deposit or a withdrawal. Often, a bank's software will automatically file a Currency Transaction Report (CTR) electronically for transactions that exceed $10,000, even if you're not aware of it.Though it might seem like a violation of your privacy, the Bank Secrecy Act helps the federal government track and prevent financial crimes, like money laundering. When banks fail to report large cash transactions, criminal and suspicious activities can fly under the radar. For instance, between 2004 and 2007, the bank Wachovia -- now a part of Wells Fargo -- allowed about $400 billion in drug cartel money to flow through its banks largely because it failed to report transactions to the federal government.When a $10,000 withdrawal can become a problemTo be clear, a $10,000 withdrawal isn't a criminal activity per se. In fact, FINCen likely receives so many uninteresting CTRs a day, you won't trigger suspicion through a large withdrawal alone. But there are some activities that will put greater vigilance on your bank account. The most common is called structuring.Structuring involves breaking up a large cash transaction, like a $10,000 withdrawal, into smaller parts specifically to evade the Bank Secrecy Act's reporting requirements. For instance, if you withdraw $12,000 in total from your checking account, but break it into three $4,000 withdrawals, the transaction might be seen as structuring.Of course, you could have good reasons for making a series of withdrawals totaling $10,000 or more. But if you do it frequently enough, your bank could report it as suspicious activity. Once flagged, structuring can embroil you in a legal investigation. At that point, if you're caught intentionally evading a bank's reporting requirements -- even if you're just a private person who doesn't want the government keeping tabs on your life -- you could face criminal or financial charges.How to safely (and legally) withdraw $10,000 or moreThe best way to withdraw $10,000 or more is to simply do it. Don't try to break it into smaller installments, or get smart and Venmo your friend half and have them withdraw it for you. If you don't want your activities tracked, don't do anything suspicious that will make your bank report it to FINCen.Truthfully, unless you are engaging in something illegal, you have nothing to worry about. FINCen knows large withdrawals and deposits happen everyday, and it's not concerned with legal cash flows. It's only when you behave suspiciously that you could find yourself under investigation.If you're concerned, you can always talk to your bank. Otherwise, just keep withdrawing as you normally would, and you won't run into any serious financial problems.

SNAP Benefits Will Increase in 2024. Here's How Much a Family of 4 Will Receive

By: Emma Newbery | Updated Aug. 7, 2023 - First published on Aug. 7, 2023

Are SNAP benefits enough?A monthly payment of $973 for a household of four equates to around $8 per person per day. While SNAP benefits aren't designed to cover everything, it isn't easy to feed a family on around $2.66 per person per meal. Indeed, research from the Urban Institute showed that the maximum benefits often don't cover a family's food costs. "Amid inflation, SNAP benefits did not cover the cost of a meal in 99 percent of counties in 2022," said the report.The new benefit amount -- a monthly increase of $34 for a household of four -- is roughly in line with cost-of-living increases measured by the Bureau of Labor Statistics (BLS). Its latest Consumer Price Index figures show that the cost of all items in June, 2023 was up 3% over the year before. However, inflation does not impact all aspects of life equally.The BLS data also shows that food at home increased by 5.7% year over year. The new SNAP benefits do not match this. Hypothetically, a 5.7% increase in benefits for a family of four would mean a new monthly payment of $992, rather than the planned $973.In addition, this year brought the end of the pandemic-era emergency food benefits throughout the country. According to CBPP calculations, this meant the average person received about $90 a month less in SNAP benefits. Even factoring in the increased SNAP benefit amount, many households have seen a significant drop in their food benefit amount, and the revised 2024 payments will do little to close this gap.How to make your SNAP benefits go furtherIt can take time and energy to provide healthy food for your family on a strict budget. The challenge is that in a busy household, time and energy are also limited resources. Even so, if you can carve out some time to plan your grocery-shopping trip, it can make a big difference.Here are some ways you might stretch your SNAP benefits a little:Use cash back apps and coupons: Look for cash back apps that work in stores that take your EBT card. You'll usually need to download an app and then scan your receipt after you've been to the store. Pay attention to coupons, whether in store or online as these can often carry hefty discounts.Always shop with a list: Planning your food shopping is one of the best ways to reduce costs. Even more so if you use a cash back app or coupons. Check what offers are available on items you normally buy before you go shopping. Mark the items that qualify for rewards or discounts on your list, so you don't miss them when you're shopping.Look for double up programs: There are Double Up Food Bucks or other programs in various states that essentially give you two for one on all produce at participating farmers markets and stores. It's a great way to get more fruit and vegetables for your SNAP dollars.Buy in bulk and batch cook: It isn't always easy to find the extra cash for bulk buying when you're eking out every cent. However, if you can manage it, you may be able to save both money and time. You might, for example, batch cook a stew and freeze portions for future meals.Unfortunately, food insecurity still impacts many American households. If you don't have enough money to feed your family this month, look for additional help. Find out what food pantries and soup kitchens are operating in your area on which days, and whether you'll need to present any documents. Call United Way at 211 for information about assistance programs in your area.

3 Reasons I Don't Like Aldi as Much as I Used To

By: Maurie Backman | Updated Sept. 13, 2023 - First published on Sept. 13, 2023

At some point in 2022, I discovered Aldi and began shopping there weekly. I found that I was able to save money on my grocery bill by purchasing certain produce items there. And since I happen to have an Aldi adjacent to my local Costco, it wasn't particularly out of my way.But over the past few months, I've become less enamored with Aldi. Here's why.1. The selection is just too limitedAldi -- at least near me -- is a minimally stocked grocery store. The shelves aren't loaded the way they are at my nearby ShopRite and Stop & Shop.To be fair, this was the case when I first started shopping there. But because there's just not a lot of selection, I'm generally limited to only buying a few items when I pop into Aldi.Not so long ago, I was running into Aldi for some fruit, which I usually buy there, and I needed to grab shredded cheddar cheese. Normally, I get that at Costco, but I didn't want to run next door to Costco and wait in a line for cheese alone. Unfortunately, though, Aldi didn't have the cheese I needed, so I had to make an extra stop anyway.2. The inventory is too inconsistentNot only is there a limited selection of food items I can buy at Aldi, but sometimes, I can't even find the five or six things I'm looking for. Aldi was once my go-to source for avocados, since it's an expensive purchase and Aldi tends to sell them for less than Costco (at least in my area). But the last few times I stopped at Aldi, avocados weren't in stock.And that's happened to me with other things, too. Over the past several months, I've struggled to find everything from cucumbers to strawberries at Aldi as well.3. What the store saves me on groceries, I lose via lost working hoursShopping at Aldi still has the potential to save me a little money on groceries. At a time when supermarket prices are up 3.6% on an annual basis, that helps.The problem, however, is that even though Aldi is right near Costco in my neighborhood, thereby allowing me to combine those trips, it still takes time to visit an extra supermarket. I have to find parking, wait in a checkout line, and spend time searching the shelves.While it's nice to save $2 here and $3 there, the reality is that a stop at Aldi might cost me 20 or more minutes of work -- especially when I don't manage to find the things I need. And losing out on that work time often means forgoing more than $2 or $3 of income. So from a time perspective, it's just not worth it.Shopping at Aldi could make sense for a lot of people. If you're someone with flexibility in your schedule and grocery list, and you're not so picky about the brands you bring home, then it could pay to spend the time visiting Aldi, even if you don't always manage to find all the things you need. But I've reached the point where shopping at Aldi makes less and less sense for me, so I'll most likely stop going there unless it's a one-off basis.

A Warning to Costco Shoppers Who Are Thinking of Buying Gift Cards

By: Maurie Backman | Updated Sept. 20, 2023 - First published on Sept. 20, 2023

Many people flock to Costco to load up on low-cost groceries and household essentials. But the warehouse club giant sells a lot more than just bulk breakfast cereal and paper towels. You can find everything from apparel to electronics to furniture at Costco. And it could also be a good source for buying gift cards.That said, Costco's gift card offerings may not meet your needs. So it's important to be mindful of these points if you're looking to purchase gift cards at Costco.1. Event gift cards might come with restrictionsCostco sells gift cards to different events. Right now, for example, you can buy gift cards to cover tickets to NASCAR races and NCAA games. And in the summer months, you can often find tickets to Major League Baseball games.But when you buy event gift cards, you're often limited to specific dates. And those may not align well with your schedule. Always read the fine print before buying a Costco gift card that you're going to redeem for event tickets.2. The selection may be limitedThe selection of gift cards you'll find at Costco can be hit or miss, depending on your local store. If there's a specific gift card you're looking for, don't bank on getting it at Costco -- even if you've seen it there before. You may have better luck at your local pharmacy or supermarket.That said, you'll generally find more options for gift cards on Costco.com than in stores. And in many cases, when you buy your gift card online, you'll get it emailed to you so you have access to it right away.3. You may not find the denomination you want One major benefit of buying gift cards at Costco is that you'll often find them priced below face value. For example, you might spend less than $100 for $100 worth of gift cards to a certain restaurant. But one hiccup you might run into is struggling to find a gift card in the exact denomination you want.Let's say you want to give your child's teacher a $35 gift card to IHOP during the holidays. Costco sells a four-pack of $25 IHOP gift cards for $79.99, which is a great deal since that would normally cost you $100. But it also leaves you in a jam if you want to give a $35 gift card and you don't want to go under or over. A $25 gift card may not be enough for that teacher and a friend or partner to share a meal. But $50 (two $25 gift cards) may be more than what you're looking to spend.Buying your gift cards at Costco could result in a lot of savings. But before you gear up to buy gift cards at Costco, be mindful of these potential issues. Also, have a back-up plan if you're buying a gift card to hand over as an immediate gift. That way, you're not left in the lurch.

6 Costco Purchases That Don't Qualify for Cash Back With an Executive Membership

By: Maurie Backman | Updated Sept. 26, 2023 - First published on Sept. 26, 2023

If you're looking to join Costco, you could get away with spending as little as $60 a year on a basic membership. But if you plan to shop there fairly often, it could pay to upgrade to an executive membership.An executive membership at Costco costs $120 a year. But in exchange, you get 2% cash back on Costco purchases, including orders you place online.It takes $3,000 in annual Costco spending to break even on the executive membership -- meaning, to make back the $60 extra you're paying for it. So that's a number you should keep in mind if you're not sure which membership to get.That said, there are certain Costco purchases that do not qualify for cash back with an executive membership. Here are some you should know about.1. Cigarette and tobacco purchasesYou may be able to purchase cigarette and tobacco products at your local Costco. But those items won't be eligible for cash back if you have an executive membership. If you're counting on your weekly cigarette purchase to get you beyond that $3,000 break-even point, you may want to reconsider the upgraded membership.2. GasMembers commonly like to fill up their cars at Costco because the warehouse club giant is known to offer competitive prices on gas. But your fill-up won't result in cash back on your executive membership. That said, the credit card you use might give you cash back, so your personal finances won't totally lose out..3. Costco Shop CardsCostco's Shop Card is the equivalent of a store gift card. The nice thing about Shop Cards is that if you gift one to someone who isn't a Costco member, they'll be allowed in to shop by virtue of having that card, even if they don't have a membership card to flash at the door. But you should also know that buying Costco Shop Cards won't result in earning cash back on your executive membership.4. StampsIt could pay to load up on stamps the next time you visit Costco. But unfortunately, you won't get cash back with your executive membership on that purchase. You might also end up with a really large quantity of stamps if you buy yours at Costco, so you'll need to be careful. Over time, the adhesive on stamps can become less sticky, so if you do most of your bill-paying online, you may be better off buying a smaller quantity of stamps at your local supermarket or post office instead.5. Food court purchasesThere's nothing like a stop at the Costco food court to fill an empty stomach on the cheap. But you should know that your budget meal of frozen yogurt or pizza won't give you cash back toward your executive membership. However, considering that you might spend a mere $1.50 for a hot dog and soda combo, not getting your 2% back means missing out on a whopping $0.03.6. Vehicle purchasesThe maximum cash back you can rack up per year with an executive membership is $1,000. To hit that max, you'd need to spend $50,000 at Costco over the course of 12 months. But that may be doable if you're buying a car through Costco's auto program. However, here's some bad news: Car purchases don't qualify for cash back with an executive membership. So if you're hoping to snag that $1,000, you might really need to buy a lot of cereal and toilet paper.An executive membership at Costco can be very worthwhile despite not earning cash back on the items above. And remember, if you're not sure whether the upgrade is right for you, you may want to just take the chance. Costco will allow you to downgrade your membership after a year if you find that it's not worth it, and you'll also be refunded whatever portion of your upgrade fee you don't make back in cash back form.So if your executive membership only gives you $40 back after a year, you can downgrade to a basic membership and get reimbursed $20. Given that lack of risk, it may be worth giving an executive membership a shot.

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