I was pre-approved for a loan, but four days before closing, the lender backed out citing credit score issues, even though my credit score has not changed. What are my options, and can they legally do this?
Did they provide an explanation? Did the loan program change, or are they citing something else? Why would they issue a pre-approval and then backtrack?
Lin said:
Did they provide an explanation? Did the loan program change, or are they citing something else? Why would they issue a pre-approval and then backtrack?
They didn’t explain much. Initially, I was told I couldn’t be on the loan because my husband claimed me as a dependent, which they knew from the start. On the same day, I found out my lender quit the company. The next day, they sent a credit denial letter saying my score was 688 (the lowest of the three reports) but didn’t mention any changes. They also cited an inability to verify income, but they already had my 1099s. This doesn’t add up.
@Kipp
It sounds like the loan officer may have mishandled your file, and now the lender is trying to cover up the mistake. You should escalate this to a manager and, if necessary, file a complaint with the CFPB.
If your credit score didn’t change, it could be an issue with verifying your income. For self-employed workers like DoorDash drivers, lenders usually require tax returns, not just 1099s, because they calculate income after deductions.
@Tavi
I provided my 1099s, but they didn’t ask for tax returns. If they needed those, why didn’t they catch this before pre-approval?
Kipp said:
@Tavi
I provided my 1099s, but they didn’t ask for tax returns. If they needed those, why didn’t they catch this before pre-approval?
They should have caught it earlier. You might need a non-QM (non-qualified mortgage) bank statement loan, which uses deposits to calculate income instead of tax returns. A broker can help you find this type of loan.
Kipp said:
@Tavi
I provided my 1099s, but they didn’t ask for tax returns. If they needed those, why didn’t they catch this before pre-approval?
This is likely a mistake by the loan officer. Income for self-employed workers is calculated using tax returns, not 1099s. It sounds like the underwriter denied the file when they reviewed it properly.
The denial letter may have included your credit score, but that doesn’t mean it’s the reason for the denial. Look at the section with the reasons for the adverse action. It might be due to income verification.
Your credit score is acceptable for most loan programs. Income verification is usually done through 1099s and direct contact with DoorDash. If this was mishandled, you might want to escalate it or consult another lender.
@Torin
It feels like they’re covering up a mistake. Should I pursue this further or just move on?
Kipp said:
@Torin
It feels like they’re covering up a mistake. Should I pursue this further or just move on?
It’s worth escalating to a manager or filing a complaint. This could help uncover whether the pre-approval process was handled improperly.
Sometimes lenders do a soft pull for pre-approval and only do a hard pull during underwriting. Are you sure nothing changed on your credit report or income documentation?
Corey said:
Sometimes lenders do a soft pull for pre-approval and only do a hard pull during underwriting. Are you sure nothing changed on your credit report or income documentation?
Nothing changed. My scores were 688, 700, and in the 690s. They sent me the reports when I was pre-approved, and there’s been no change since then.
They have to send you a denial letter. What specific reasons are listed?
What does your lender mean by ‘your husband claimed you as a dependent’? That makes no sense. Spouses cannot be dependents on tax returns.
This sounds like a bad loan officer who didn’t properly verify your qualifications during the pre-approval process. When underwriting reviewed it, they found issues.
It seems like they issued a pre-qualification, not a fully underwritten pre-approval. Unfortunately, this happens when the loan officer doesn’t do their due diligence upfront.
Lenders typically use the middle credit score for qualification, and 688 is acceptable for most programs. This sounds like an issue with income verification. The loan officer likely mishandled your file.
They may have struggled to verify your employment with DoorDash. This is a common issue with gig economy jobs because there’s no HR department to contact.