Q: Is it legal for a finance person to tell you that you are prequalified for a loan, give you a closing date and even move up your closing date only to tell you a week before the closing date that you are not getting approved? Is there anything that can be done to that person for the situation that I just described? I want to prevent him from doing this to anybody else in the future.
A: Many loan professionals will tell their borrowers that they are prequalified for a loan, but being prequalified is very different than getting a true approval letter from that lender, which commits to funding your loan provided it appraises out in value.
You need to know that many mortgage brokers and lenders will review basic information that is given to them by the prospective borrower. They look over that information and think that it all may look good. Then they might even tell the borrower that they could even close sooner, but they could be dead wrong on both counts.
The reality is that the person taking the loan application may have a general idea of what your loan application looks like, but the underwriting department makes that ultimate determination. The underwriting department may question issues that may come up on the credit report, may question unusual activity in your checking account, may have problems getting your income verified by your employer or may find other problems in the loan application.
When these problems come up, they can stop a loan cold. Your loan broker or lender may have had no idea of these issues and might have been trying to move your deal along until things popped up in the underwriting process. We don’t know what other circumstances arose in your application, but what you describe happens fairly frequently.
If there are other things going on that you didn’t disclose in your letter, and the person that you were dealing with was unethical or lied, we’d suggest you talk to the office manager or other supervisor for that person to discuss what occurred. If you still have grievances, or suspect wrongdoing by the person that helped you, you can file a complaint against that person with the governmental board that regulates mortgage brokers or lenders in your state. Again, what you describe is not unusual so we don’t know if there was anything that really went wrong in your transaction based on the limited information from your question.