Can a Loan be Denied After Closing?
You finally closed on the house of your dreams, or you sold your property, and now it’s on to the next one. It’s been a long, arduous process, even when everything goes smoothly. You’ve signed what feels like a thousand documents, and just as the ink is dry…the loan is denied?! Are you just having a bad dream, or can a loan be denied after closing?
First, it’s important to understand the closing process. There’s a lot that goes into it behind the scenes while you wait to sit down at the closing table. On the front end, you’ve gotten an inspection, the lender has performed an appraisal, contract negotiations have been finalized with the other party, and you’ve supplied the lender with financial documents to prove your credit-worthiness. Your loan is moved into Clear to Close status, and that’s it, right? Once your lender has declared you Clear to Close, you’re not done yet. Clear to Close means that the lender has received and approved all of your lending documents, and they recognize that all the terms of the purchase contract have been met. At this point, a closing date is finalized.
However, there are still (at least) a few days between this designation and the actual closing. The lender will use this time to run one more credit check and verify employment status one more time; after all, they want to be absolutely sure that you are capable of repaying any money loaned to you. If there are any changes to your credit score or employment status, your loan can be denied during the final countdown.
How can you protect yourself so that your loan isn’t denied at the final step? First, don’t quit your job or start a new one, even if it means a pay raise. Your loan funding is based on a financial picture when you start the loan process; any changes (whether they are technically positive or not) means the picture changed, and the process can’t be completed. Also, now is not the time to upgrade your car or get swept up in the excitement of closing and make a large furniture purchase for your new home. Anything that can impact your credit score could also impact your closing. Until all the documents are signed AND the lender has funded the loan, don’t make any big financial moves that could put your credit standing, and closing, in jeopardy.
Clear Title is Northwest Florida’s top title company that also services loan closings, escrow services, title insurance, and more. Looking for a helping hand in the home buying process? Call one of our conveniently located offices to speak to one of our experts today. We look forward to helping you!
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