Q. My son is a private contractor and was preapproved for a mortgage. But after his bid on a home was accepted, the bank refused to make the loan after looking at his tax returns. It said he earned enough, but he had put too much money back into his business. What does preapproved actually mean, and do you know of a way he can work around this to get a loan?

A. Yes, we do.

Getting preapproved for a loan is a good thing.

When you start shopping for a home, you fill out an application for preapproval that looks a lot like a full-blown mortgage application. The lender uses that to determination how much you make, how many other debts you have, and how big of a loan you could probably afford.

As part of the process, the bank or mortgage company pulls your credit report and makes sure your credit history is strong enough to qualify for the loan you want. (Here's where to find a complete explanation of how the preapproval process works.

When your son was preapproved, the bank sent him a letter that said how much he could borrow, based on his income and credit history.

When he found the house he wanted to buy, he formally applied for a loan. As part of this process, he had to submit all of the paperwork to back up what he said on the application, including his tax returns from the last two years.

The fact that he is self-employed almost guaranteed that the lender would take a very close look at those returns, because he doesn't have the W2s or paycheck stubs that applicants who work for a company would submit.

Just because one bank didn't like what it saw doesn't mean every bank will reject his application. Your son needs to take his business to another lender.

A good place to start is with our extensive database of mortgage rates. It will allow you to compare rates and fees, and get some good leads on where to go next.