10 Common Mistakes to Avoid When Applying for a Mortgage Loan

Buying a home is one of the most exciting milestones in life, but the financing side of things can be a minefield if you aren’t prepared. To help you breeze through your home-buying or refinancing process, I’ve put together a guide on the most common mistakes to avoid when applying for a mortgage loan. These mistakes usually occur because no one has informed the homebuyer what to expect. 

1. Neglecting Your Credit Score

Your credit score is the heartbeat of your mortgage application. Missing payments or carrying high balances relative to your credit limits will lower your score. Even a slight dip in your score can result in a higher interest rate, which could cost you tens of thousands of dollars over the life of your loan. Keep your credit clean and your payments on time.

2. Changing Jobs Mid-Process

Stability is one of the things lenders look for during a mortgage application. Therefore, a sudden change in employment can raise red flags about your ability to repay the loan. If you must change jobs, ensure it’s a vertical move in the same industry and give your lender a heads-up immediately. You’ll likely need an offer letter and your first pay stub to stay on track.

3. Making Large Purchases on Credit

It is incredibly tempting to start shopping for a new car or expensive furniture for your future home. Don’t do it. Large purchases on credit increase your monthly debt obligations, which negatively affects your Debt-to-Income (DTI) ratio. If you need to buy something, use cash—but avoid opening any new lines of credit until your loan has officially closed.

4. Skipping the Pre-Approval Process

Many buyers get over-eager and start touring homes before they’ve even talked to a lender. This is a recipe for heartbreak. If you fall in love with a property you aren’t qualified for, you’ve wasted time and energy. Get a formal pre-approval. This ensures an underwriter has vetted your file for red flags, giving you a clear budget and more negotiating power.

5. Submitting Incomplete Documentation

Lenders are sticklers for paperwork! So, when your loan officer asks for bank statements or tax returns, they need every single page, including the blank ones. If a statement says “Page 1 of 8,” the lender needs all eight pages. Providing incomplete files slows down the process and causes unnecessary stress.

6. Ignoring the “Hidden” Costs of Homeownership

Your mortgage is more than just principal and interest. You must account for:

• Property taxes
• Homeowners insurance
• HOA fees
• Hazard or fire insurance (especially in high-risk areas)

Failing to factor these in can leave you “house-rich and cash-poor,” struggling to make ends meet every month.

7. Maxing Out Your Credit Cards

Even if you pay your bills on time, high credit utilization (maxing out your cards) can hurt your credit score and increase your DTI. To maintain your qualification status, keep your credit card balances as low as possible during the application period.

8. Shuffling Money Between Accounts

Lenders need to see financial stability. Avoid moving large sums of money between your savings, checking, and investment accounts. Every time you move money, you have to provide a “paper trail” to prove where it came from. To make your life easier, leave your funds where they are until your lender instructs you otherwise.

9. Losing Track of Interest Rates

Interest rates can shift while you are house hunting. If you haven’t checked the market in a few months, your buying power may have changed. Stay in touch with your mortgage professional weekly or semi-monthly to ensure that current rates still align with your target purchase price.

10. Neglecting the Fine Print

Before you sign your closing documents, read the terms and conditions. These documents can range from 100 to 150 pages, so ask for a copy in advance. You are ultimately responsible for understanding your loan obligations, including any potential fees or specific requirements.

You can ensure a smooth path to homeownership by avoiding these mistakes.

Ready to start your journey? I’d love to help you finance your next property. Feel free to reach out to me directly or book a time on my calendar to discuss your options!