9 Major Mortgage Mistakes to Avoid to Keep Your Mortgage Pre-Approval

Mortgages often seem like a necessary evil for those of us who don’t can’t pay for a home outright, which let’s face it, is nearly everyone.

Buying a home is a lengthy, exhausting process of talking to different professionals, getting quotes, and lining up endless stacks of paperwork. If you’re hoping for the smoothest version of events, be sure to know which mortgage questions to ask your lender and keep these common mortgage mistakes in mind.

1. Rushing in blind

Take your time. A house is a huge investment and any mistakes you make will follow you for a long time. Make sure you take some time to plan out your strategy.

For a home mortgage you’re going to need good credit and a decent credit history. So check your numbers and start making moves to improve any problem areas in your credit.

Take a few months to start budgeting for extra home hunting expenses as well. You can never be too prepared.

2. Underestimating costs

It’s easy to look at the price of the house, your downpayment and the closing costs when you’re budgeting to move into a new home. But many people are caught off guard by expenses they didn’t initially consider.

Insurance and taxes are going to factor in as well. It’s not a bad idea to sit down with a trusted financial advisor to get the whole picture before setting a savings goal.

The more money you save, the better loan you can potentially qualify for.

3. Changing jobs

Getting a mortgage depends on a lot of factors, and your income is one of the bigger ones. A lender is going to look at how much money you make and compare it to the size of the loan you’re asking for. If they don’t like what they see, you may be bumped into a different interest bracket or not disqualified from the loan entirely.

Even if you’re making the leap to a better job that pays more money, you still want to wait at least a few months before applying for a mortgage as the income shift will throw a wrench in the negotiations. A lender will look at your last few years’ worth of income and take into account job stability. So plan out the timing of any major employment changes so they don’t derail your home hunting.

4. Multitasking

Sometimes we get excited and try to do everything at once, but applying for a mortgage is really something that deserves your total attention.

It’s tempting to open new credit cards or start messing with personal loans since you’ve already got your credit report laid out in front of you, but avoid doing so. New lines of credit will lower your odds of a low interest rate.

5. Last minute deposits

If you’re going to be shuffling money around, do so a few months before you apply for a mortgage. This is called seasoning your assets. It’s incredibly simple, all you have to do is wait.

6. Forgetting to lock-in

Mortgage rates are incredibly fluid. The rate you were quoted early in the morning may not be the same rate available to you in the afternoon.

Once you’re happy with your mortgage rate, be sure to lock it in. Tell your lending institution, your broker, or your bank when you’re ready to lock in your rate. The lock in won’t be permanent, and may only be guaranteed for a matter of weeks or even days. But for that lock in period, you will be safe from any rate changes.

7. Not reading the fine print

Read your loan documents and then read them again. If anything unsavory is in the works, it’s going to pop up in the terms and conditions somewhere. Make sure you know exactly what you’re agreeing to and what your requirements are.

A house is a big investment and a lot of money. You don’t want to lose all that effort because you don’t understand the loan’s conditions. It’s a good idea to have someone professional look over the documents, as well, ideally someone who’s not directly involved with the loan.

8. Ignoring other options

Don’t get tricked into thinking all mortgages are the same. Despite what companies and lenders want you to think, it’s possible to find better deals by shopping around a bit. Get your quotes and a general idea of several different lenders before picking one.

Approach mortgage shopping the same way you approached your general house hunting. You didn’t sign for the first house you looked at, did you? Then don’t accept the first lending option you come across, either.

9. Skipping the pre-approval

Pre-approvals and pre-qualifications are both important, but a pre-approval is the more useful of the two. With a pre-approval, a lender will actually pull your credit to determine what size loan you qualify for. You’ll fill out a placeholder mortgage application and you’ll receive documentation stating your loan approval.

If you’re shopping in a competitive market, having a pre-approval can mean the difference between getting the house you want or being turned away. Sellers will often accept a lower offer if it’s from someone who has been pre-approved for the loan.

Learning from the mistakes others have made before you on mortgages isn’t just smart, it’s valuable! By knowing what to look out for, you’ll be setting yourself up for success in securing your home loan.