Why Did My Pre-Approval Drop Even Though Nothing About Me Changed?

Short answer: it's not you, it's the rate.

I had a client I pre-approved back in April for up to $250,000. That same person came back to me recently. Same job, same income, same debts, nothing changed on their end at all. Today they only qualify for about $210,000. That's a 16% drop in buying power in six months, and none of it is their fault.

Here's why it happens. Your mortgage payment is made up of two pieces, principal and interest. When rates go up, the interest chunk of that payment gets bigger, which means a smaller slice is left over to go toward the actual loan amount. Your budget for a monthly payment might stay exactly the same, but what that budget buys you shrinks every time rates move.

Most people assume a lower pre-approval number means something is wrong with their credit or their income. Almost every time I see this, it's neither. It's just the math of interest rates working against them.

The good news is there are real ways to work around this instead of just accepting a smaller number.

Rate buydowns. Negotiating seller concessions at closing and using them to buy your rate down, sometimes a full point or more, can put real buying power back in your pocket.

Locking your rate early once you're under contract, so you're not exposed if rates move again before closing.

Adjusting your price range or being a little more patient on timing if the math truly doesn't work right now.

Working with a lender who actually structures the deal instead of just quoting you a number. There's usually more room to work with than people think.

If your pre-approval number came back lower than you expected and you're trying to figure out why, it's probably not you. Give us a call and we'll walk through what actually happened and what your options are.