10 Mortgage Mistakes to Avoid: During the Mortgage Process
Making these mortgage mistakes during the mortgage process can have some big consequences. Delayed closings or even being denied for a loan due to these mortgage mistakes is something that we all want to avoid.
Information is the key to your success make sure that you avoid these 10 common mortgage mistakes during the mortgage process.
10. Forgetting to Ask Questions
Don’t forget to ask questions. We are here to help you understand each step of the mortgage process and your best mortgage options available.
If you are buying your first home our “First Time Home Buyer Success Guide” is packed with great information to help you get started.
Best Practices: If you have questions or concerns during the mortgage process, reach out to your mortgage consultant.
9. Giving Mis-Information on the Application
The best way for a mortgage company to give you an accurate assessment of your potential interest rate, mortgage process timeline, and qualification is to understand your goals and financial outlook and best as they can.
If important information is left out or in-accurate in the initial application, your loan is more likely to be delayed or even denied in the underwriting phase of the mortgage process.
Best Practices: Do your best to give accurate information in your application.
8. Changing Your Marriage Status During the Mortgage Process
Your marital status impacts your mortgage. Texas is a community property state, which means that your spouse must be included on the title/deed to your home.
If you get married between the application date and closing your mortgage, your loan will be denied. However, you can reapply once you are married. Read more about how marriage impacts your mortgage in our previous article.
Refinance your mortgage or purchase a new home after you have a final divorce decree. Federal and state mortgage guidelines require legal documentation of the division of assets before a mortgage can be approved after a divorce.
Best Practices: Don’t get married or divorced during the mortgage process.
7. Not Paying Your Taxes or Bills
This may be obvious, but documentation is required to show that your are current on any federal income taxes and/or state property taxes before your mortgage application can be approved.
Unpaid bills can impact your credit score, if you miss a bill payment during the mortgage process and your credit score drops your loan may be denied.
Best Practices: Avoid these major mortgage mistakes by filing your taxes and paying your bills on time.
6. Buying Things on Credit or Closing Credit Accounts
While your mortgage application is open, you should avoid making financial decisions that impact your credit. Making large purchases on credit will also impact your debt to income ratio, which may affect you ability to qualify.
Additionally, closing older credit accounts can drop your credit score. Be aware that your credit shouldn’t drastically change during the mortgage process. Learn more about “Cleaning up your credit score before buying a home” in one of our past articles.
Best Practices: Wait to buy furniture, appliances, or other large purchases until after your mortgage loan in closed.
5. Co-Signing on Other Loans
Co-signing on loans, apartment leases, or other financial obligations for friends or family members will impact your debt to income ratio. If the person you have co-signed for makes late payments, misses payments, or defaults on the loan, your credit will be impacted and you will be held financially responsible for the loan.
When you apply for a mortgage, these co-signed loans or leases can be limiting to your mortgage options.
Best Practices: Be very cautious of co-signing for another person. Understand the potential impact that co-signing can have on your financial options.
4. Depositing Undocumented Cash
Federal mortgage guidelines that prevent money laundering through real estate transactions, require all cash deposits to be documented or “sourced.” When you buy a home, the money used to make that down payment must be documented to show that the funds are yours.
- Any gifted funds from a family member for the down payment must be supported with a gift letter.
- The sell of assets like cars, antiques, or jewelry for the down payment on a home must be documented with a signed bill of sale.
- Funds taken from a retirement account, grants, or inheritances must also be documented.
Best Practices: Document any funds used for the down payment on the home purchase. Avoid making any undocumented cash deposits during the mortgage process.
3. Changing Jobs During the Mortgage Process
Your employment and income are major factors in calculating your mortgage. A change in your employment could mean starting a new mortgage application, and the process over again.
Best Practices: Wait to change jobs until your loan has closed. Have savings that can help you keep up with your financial obligations during times of job transitions.
2. Not Getting Pre Approved Before You Shop for a Home
Shopping for a home without a being pre approved for a mortgage loan, put you at a disadvantage. Many realtors require their clients to be pre approved before they take them to home showings. Sellers are also much less likely to accept an offer from a potential buyer who is not pre approved for financing.
Best Practices: Get Pre Approved for Free at TexasLending.com.
Many parts of the mortgage process are regulated by a number of Federal Guidelines. This system of checks and balances takes time, and we move as quickly as possible to get your loan closed on time.
However, customers who procrastinate on sending in required documentation, paying for the property appraisal, or signing disclosure statements can slow things down. These time delays can push back your closing date, cause rate lock extension issues, and even cause the need to start the loan process over again.
Best Practices: Try to reply to requests from your mortgage consultant or loan processor within 24 hours of the request.