The lender did not properly prequalify the borrower. In most lending institutions, someone takes a mortgage application and passes the package to a processor who pulls together all the information necessary to get the loan approved, including pay stubs, appraisal, credit report, and verifications.
The processor then hands the loan to an underwriter who approves or denies the loan. When taking the application, the originator could miscalculate numbers, transpose numbers, or mistake the qualifying ratios of one loan program for another. In any of these cases, the buyer may not qualify for the loan or the program. This may not be discovered until the processor or underwriter catches it.
The mortgage rates change. The buyer may be preapproved for a loan based on a 6%, thirty-year, fixed rate loan. Unfortunately, the buyer may be at the very top of his or her qualifying limit. Rates change daily. If the rate rises to 6.5% prior to settlement, the buyer may no longer qualify to purchase the home and the loan will be denied.