Common Mortgage Application Mistakes and How to Avoid Them

Getting a mortgage involves a lot of moving parts, and a single misstep can slow everything down. The good news is that most problems are avoidable once you know what lenders look for. Think of the time between application and closing as a period when your finances should stay as steady and predictable as possible.

Before You Apply

Skipping pre-approval. Shopping for homes without talking to a lender first can lead to disappointment. Pre-approval sets a realistic price range, shows sellers you are serious and gets much of your paperwork reviewed early.

Not checking your credit. Review your credit reports before you apply. Errors happen, and correcting them takes time. Knowing your score also helps you understand which programs may fit.

Not comparing options. Loan programs, rates and fees can differ. Take time to understand your choices and review your Loan Estimate closely so you know what you are paying for. You can compare loan programs to get a feel for the differences.

Forgetting about closing costs. The down payment is not the only cash you need. Appraisal, title, lender fees, prepaid taxes and insurance add up. Ask for an estimate early and plan for it, and keep some savings in reserve after closing.

While Your Loan Is in Process

This is where many hiccups happen. Lenders typically check your credit and employment again shortly before closing, so changes in the middle can cause trouble.

• Taking on new debt: financing a car, opening a store card or buying furniture on credit can raise your debt-to-income ratio, which compares your monthly debts with your income. Even if you still qualify, it can change your terms. Wait until after closing.
• Making big cash moves: large unexplained deposits or withdrawals may need documentation. Moving money between accounts is fine, but keep a record and let your loan officer know.
• Changing jobs: lenders value stable employment. Switching jobs or moving to self-employment mid-process can complicate approval. If a change is unavoidable, tell your lender right away.
• Missing late payments: keep paying every bill on time. A new late payment can lower your score at the worst moment.
• Co-signing for someone else: that debt may count as yours.

Paperwork Matters

Incomplete or slow paperwork is one of the most common causes of delays. When your loan officer asks for pay stubs, bank statements or a letter explaining something, send complete copies quickly. Include every page of statements, even blank ones. Keep a folder, digital or paper, so you can find documents fast.

Understand What You Are Signing

If you are considering an adjustable-rate mortgage, make sure you understand how and when the rate can change, how much it can rise and what your payment could look like after the fixed period ends. An adjustable loan can be a good fit for some borrowers, but it should be a deliberate choice.

The same goes for any part of your loan: if something is unclear, ask. A good loan officer would much rather explain it twice than have you feel uncertain at the closing table.

Keep the Lines of Communication Open

Life does not pause while you buy a home. If something changes, such as your job, a new expense or a family situation, tell your loan officer as soon as possible. Most issues are much easier to solve when they come up early. Quiet surprises found late in underwriting are what tend to derail closings.

A smooth approval comes down to preparation, stability and communication. If you are getting ready to apply, our first-time home buyer page is a good primer, and a FLO Mortgage loan officer can help you plan each step. Reach out today to get started.

This article is for general education and is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines and program availability. FLO Mortgage, Company NMLS #1835856. Equal Housing Opportunity.