9 Things to Avoid When Applying for a Mortgage

Buying a home is an exciting and rewarding experience, but securing a mortgage can seem daunting if you’re not prepared. To prepare yourself and increase the chances of approval, here are a few things to avoid when applying for a mortgage:

1. Don’t Apply for New Lines of Credit

When applying for a mortgage, it’s important to avoid applying for any new lines of credit. This includes credit cards, personal loans, or car loans. Applying for new credit can negatively impact your credit score, potentially affecting your chances of getting approved for a mortgage.

2. Don’t Make Any Large Purchases

It’s also important to avoid making any large purchases when you’re in the process of applying for a mortgage. Lenders assess your debt-to-income ratio, which is a measure of your ability to pay off your debts. Making large purchases can increase your debt and affect your debt-to-income ratio.

3. Don't Change Jobs

Lenders use your employment history to determine your stability and ability to make mortgage payments. Changing jobs during the mortgage application process can negatively impact your chances of getting approved. If you do change jobs, please speak with your lender about your options.

4. Don't Lie On Your Application

Lying on your mortgage application is a serious offense and can result in your application being denied. It’s important to provide accurate and truthful information on your application. Lenders will verify the information you provide, and any discrepancies can result in your application being denied.

5. Don't Make Any Late Payments

Late payments can significantly impact your credit score, which is one of the most critical factors in determining whether you’ll be approved for a mortgage. Even one late payment can have an effect on your score. Having trouble remembering to make your payments on time? Try looking into autopay options or keeping track of due dates on a calendar.

6. Don’t Deposit Large Sums of Cash

If you’re planning to use cash for your down payment, it’s important to avoid depositing large sums of cash into your bank account. Lenders will want to see a paper trail of where the money came from. Depositing large sums of cash without a clear paper trail can cause confusion or suspicion when trying to verify your income and assets, which could potentially delay or even result in the denial of your application.

7. Don’t Cosign Loans for Anyone

When you cosign a loan, you’re essentially taking on responsibility for the loan if the primary borrower can’t pay it. You put your credit and personal relationship with that person on the line if they can’t make their payments. If you’re in the process of applying for a mortgage, it’s best to avoid cosigning loans for anyone.

8. Don’t Switch Bank Accounts

Switching bank accounts can make it difficult for lenders to verify your financial history. It’s important to maintain the same bank account throughout the mortgage application process to ensure a smooth and efficient process, as lenders may ask for past bank statements. 

9. Don’t Close Any Accounts

When you close a line of credit, your available credit decreases, which effectively increases your credit utilization ratio, or how much credit you have used versus how much you have available. If your utilization is above 30%, this looks like you use a higher amount of credit and can look like a risk to lenders.

Now that you know what you shouldn’t do, let’s look at what you should do:

Do Discuss Changes with Your Lender

If you’re considering any changes that may affect your ability to get approved for a mortgage, it’s important to discuss them with your lender. Your lender can provide guidance on the best course of action to take to ensure a smooth and efficient mortgage application process.

Do Shop Around and Compare Mortgage Rates

Shopping around and comparing mortgage rates can help you find the best mortgage for your financial situation. Mortgage rates can vary significantly depending on the lender and your credit history, so it’s important to do your research and compare rates from different lenders. Keep in mind that while the interest rate is an essential factor in choosing a mortgage, there are other important factors to consider, such as closing costs, loan term, and lender reputation. By shopping around and comparing mortgage rates, you can find the best mortgage for your financial situation and increase your chances of getting approved.

Follow these tips, and you'll be on your way to a successful mortgage application! When you’re ready to find your perfect home, reach out to one of our local experts for no-pressure guidance.