Why it happens
Preapproval usually means a lender looked at your credit and the income and asset information you gave, and ran it through an automated system. Full underwriting then verifies everything. Common reasons a file falls apart after that:
- New debt or a credit change: a car loan, new card, or a late payment that shows up on an updated report.
- Income didn't verify the way it was entered: overtime, bonus or self-employment income that can't be counted the way it was estimated, or a recent job change. See job changes.
- Debts counted differently than expected: for example, a deferred student loan, or in Texas, a non-borrowing spouse's debts on an FHA, VA or USDA loan. See student loans.
- Cash to close: large deposits that can't be sourced, or not enough left for reserves the program needs.
- The appraisal: the home appraised low or needs repairs the program requires.
- Lender-specific rules: at some lenders, an overlay that wasn't applied at preapproval.
First, check your contract dates
Most Texas resale contracts use the TREC Third Party Financing Addendum (TREC No. 40-11, effective Jan 3, 2025). It splits financing approval into two parts, Buyer Approval and Property Approval, and the addendum says financing approval is obtained only when both are. The two parts have different deadlines and different ways to terminate (TREC No. 40-11, Paragraph 2).
- Buyer Approval (Paragraph 2A) is about you: whether the lender is satisfied with your assets, income and credit history, and the loan terms in the addendum are available. If your contract is subject to Buyer Approval, it lists a number of days after the contract's effective date. Within that window, you can terminate by giving the seller a notice of termination and a copy of the lender's written statement of the reasons, and the earnest money is refunded. If that window passes without a termination, the contract is no longer subject to Buyer Approval. The form also has a box for contracts that aren't subject to Buyer Approval at all.
- Property Approval (Paragraph 2B) is about the house: whether it meets the lender's underwriting requirements, like the appraisal, insurability and lender-required repairs. This deadline is tied to closing, not the effective date: on or before the 3rd day before the closing date, with the same notice and lender statement. If you terminate under this paragraph, the earnest money is refunded. If you don't, Property Approval is treated as obtained.
- FHA and VA loans also have a separate appraised-value provision (Paragraph 4), and the form says the 3-day notice requirement in Paragraph 2B doesn't apply to it.
The form says time is of the essence and strict compliance with these deadlines is required. Which part applies can depend on why the loan was denied, and the dates and boxes in your own signed contract are what count. Talk to your agent today about where you are in that timeline. This is general information about how the form is laid out, not legal advice. If you have legal questions about your contract, a Texas real estate attorney is the right person to ask.
Can I still close?
It depends on why it was denied and how much time you have.
- Same lender, different program. A file that doesn't fit one program sometimes fits another (for example, conventional instead of FHA, or FHA manual underwriting instead of an automated approval). See debt-to-income.
- New lender. A different lender may not have the same overlay. A new lender has to start its own process, including its own disclosures, so this takes time. On FHA, you can ask the first lender to transfer the appraisal, and HUD requires it to do so within five business days once it's been paid for (HUD 4000.1 II.A.1.a.iii(B)(8)). On other loans, the new lender may need a new appraisal.
- Fix the issue. Paying off a small debt, documenting a deposit, or adding a co-borrower can sometimes change the result.
- Extend or renegotiate. If you need more time, your agent can ask the seller for an extension in writing.
Which path makes sense comes from the denial reason. The agency rule, the lender's own minimums, any program rules, and the underwriter's decision all play a part, and a new lender can only help with some of those.
Fictional example
This example is made up to show the steps.
Tasha in North Richland Hills was preapproved for a conventional loan. Two weeks before closing, her updated credit showed a new furniture account with a monthly payment, and her ratio went over what her lender's automated approval accepted. She called her agent the same day to check the Buyer Approval deadline, then asked for the denial in writing. A second review showed that paying off the furniture account at closing with funds she already had would bring her ratio back in range. Her lender re-ran the file, and underwriting had to approve the updated version before closing.
What to do this week
- Ask your loan officer for the exact reason in writing.
- Ask your agent for your financing deadline under the contract.
- Don't open, close or move anything else until you know the plan.
- Get a second opinion fast if the reason looks lender-specific.
Next step
Under contract and just got bad news? Call me today. Call McKade
Related questions
Sources
Links checked Oct 19, 2026.
About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.
Equal Housing Opportunity.
Last reviewed: Oct 2026