Applying for a mortgage can be overwhelming. It’s a big step toward owning a home, but it’s easy to slip up. Mistakes on your mortgage application can delay approval, raise your interest rate, or even cost you the loan. In this article, we’ll cover the most common mistakes on mortgage applications and share simple ways to avoid them.
1. Not Checking Your Credit Report First
Your credit report is a big deal when you apply for a mortgage. Lenders use it to figure out if you’re a safe bet. If there are errors—like an old debt that’s already paid—it can hurt your chances. Many people skip this step and regret it later.
Check your credit report a few months before you start your mortgage application. You can get a free copy once a year from AnnualCreditReport.com, a government-authorized site. Look it over carefully. If something’s wrong, dispute it with the credit bureau right away.
2. Opening New Credit During the Process
Getting a new credit card or loan while your mortgage application is in progress can mess things up. It changes your credit score and debt-to-income ratio. Lenders don’t like surprises, and this could make them rethink your loan.
Hold off on new credit until after your mortgage closes. I once knew someone who bought a car during their mortgage process. Their loan got delayed because the lender saw the new debt. Wait it out—it’s worth it.
3. Forgetting Important Documents
Lenders need proof of your income, taxes, and bank accounts. Missing even one paper can slow everything down. It’s a common mistake on mortgage applications because people underestimate what’s required.
Make a checklist: pay stubs, tax returns, bank statements, and ID. Gather them early. Keep copies in a folder so you’re ready when the lender asks.
4. Misunderstanding Mortgage Terms
Fixed-rate? Adjustable-rate? Points? If these sound confusing, you’re not alone. Not understanding your mortgage terms can lead to picking the wrong loan. That’s a mistake that could cost you thousands over time.
Ask your lender to explain everything in plain English. Don’t sign until you get it. A friend of mine picked an adjustable-rate mortgage without realizing the payments could jump. She struggled later when rates went up.
5. Not Shopping Around for Rates
Sticking with the first lender you find is a big mistake. Mortgage rates vary, and even a small difference can save you a lot. The Consumer Financial Protection Bureau found that borrowers who compare rates save an average of $300 a year.
Get quotes from at least three lenders. Compare interest rates and fees. It takes time, but it’s like shopping for a car—you want the best deal.
6. Ignoring Closing Costs
Closing costs can surprise you if you’re not prepared. These fees—for appraisals, title insurance, and more—can add up to 2-5% of your loan. Forgetting them is a common mistake on mortgage applications.
Ask your lender for a detailed estimate early. Save extra cash to cover these costs so you’re not scrambling at the end.
7. Overlooking Long-Term Costs
Focusing only on the monthly payment is risky. A mortgage is a long-term commitment. If you don’t think about interest over 30 years, you might stretch your budget too thin.
Use a mortgage calculator, like the one from Bankrate, to see the total cost. Make sure it fits your future plans, not just today’s budget.
8. Fudging the Truth
Exaggerating your income or hiding debts might seem tempting, but it’s a terrible idea. Lenders verify everything. If they catch you lying, your mortgage application is dead in the water.
Be honest. Provide accurate info. It’s better to work with what you have than risk losing it all.
9. Mixing Up Pre-Approval and Pre-Qualification
Pre-qualification is a quick estimate. Pre-approval is a deeper check with documents. Mixing them up can leave you unprepared when making an offer on a house.
Go for pre-approval before house hunting. It shows sellers you’re serious and helps you know your real budget.
10. Ignoring Expert Advice
Mortgage brokers and loan officers know the ropes. Ignoring their tips can lead to avoidable errors. Some people think they can handle it all alone and miss out on good guidance.
Listen to the pros. Ask questions. They can spot problems you might not see.
Final Thoughts
Avoiding these common mistakes on mortgage applications can make the process smoother and save you money. Check your credit, skip new debt, gather your papers, understand your loan, compare rates, plan for fees, think long-term, stay honest, get pre-approved, and lean on experts. With these steps, you’ll be ready to tackle your mortgage with confidence.
