What Not To Do When Applying For A Mortgage – 16 Things Not To Do

What Not To Do When Applying For A Mortgage? Nothing you do as a home buyer should put your chances of closing on the house you’ve chosen in jeopardy. Many people can’t purchase homes without qualifying for a mortgage, so if you’re one of them, you should get ready to be a strong applicant. Any of the following errors could lower the amount of financing you are eligible for, increase your mortgage’s interest rate, or result in a lender rejecting your mortgage application. And if you want more professional financial counsel, think about partnering with a financial advisor who can customize guidance to your particular circumstances.

When applying for a mortgage, there is no hidden code. Fewer people consider what not to do, even if most people are aware of how to obtain a mortgage or obtain a better rate.

When it comes to securing a mortgage, there are probably more “don’ts” than “does,” regardless of whether you’re getting ready to apply or have already been approved.

What Not To Do When Applying For A Mortgage

1. Leaving your job

This one should really be obvious. Your salary also plays a significant influence in determining whether you are approved for a mortgage, even though your credit score and credit history do.

It’s never a smart idea to leave your job without a backup plan, but doing so when you’re applying for a mortgage is pretty much the worst scenario imaginable. Changing careers is also not the greatest course of action, even if employment is already lined up for you.

Lenders want proof that you have a reliable source of income that (likely) won’t change.

2. Avoid buying a car

If you’re applying for a home loan, it’s not a smart idea to make a significant purchase like a car. The reason for this is that mortgage lenders will look at your debt to income ratio.

Most individuals need a loan to purchase a new car since they can be rather expensive. A monthly payment on a vehicle loan will raise your overall debt-to-income ratio since your debt-to-income ratio compares how much you make to how much you spend on necessary costs. This can give lenders the impression that your financial status is a greater danger.

In general, you wouldn’t want to apply for auto or home loans close together because either one might easily damage your chances of being approved for the other.

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3. Avoid using your credit cards carelessly.

You shouldn’t use your credit card excessively when looking for a home loan because certain loans require a minimum credit score in order to be approved.

This is so that if your credit utilization rate rises too much, it won’t be good for your credit score. Your credit usage ratio compares the amount of available credit you have to the amount of credit that has previously been used.

It can be tempting to start buying furniture and home décor early if you’re eager to move into a new house, and credit cards can make that easy. However, it is preferable to postpone outfitting your new house until you are certain the mortgage has been authorized.

4. Keep your current bank.

Consider the kind of person you’d want to give some of your money to in order to comprehend the mortgage lender’s position in the loan procedure. When considering whether to accept your mortgage, lenders consider a number of variables, much like most everyday people do when selecting whether to lend money to someone.

Examining a person’s financial history, which includes their banking history, is one of the key deciding criteria in the lending process. You are more likely to lend money to a friend or member of your family if they have a track record of responsibly repaying loans.

Mortgage lenders share this sentiment, so avoid switching banks when applying for a loan because it distorts your banking history and could be a red flag for lenders.

5. Getting Married to a Bad Credit Person

After getting married, it’s usual for couples to purchase a property. However, keep in mind that if you’re putting your finances in order, both your credit ratings and financial histories may be taken into consideration. Before attempting to obtain a mortgage, it could be a good idea to work on raising your future spouse’s credit score (and paying off any wedding loans or other debt you both incurred).

6. Amassing Debt

Prior to submitting a mortgage application, it is not advisable to take on more debt. Your debt-to-income ratio, or the amount of debt you pay off each month in relation to your monthly income – is but one element that lenders take into account when examining your mortgage application. You will be viewed as a dangerous borrower if it exceeds a particular cutoff (usually 43%).

7. Ignoring credit checks

It’s telling how you’ve handled your credit. It demonstrates to a lender your level of financial responsibility and your propensity to pay off debt in the future. Before submitting an application for a mortgage, it’s a good idea to check your score since it’s frequently one of the factors that lenders consider when approving homebuyers for mortgages.

8. Not Paying Bills on Time

Since lenders care about credit scores, it’s essential to work on raising and safeguarding your score before applying for a loan. You should avoid doing anything that can lower your score, such as skipping bill-paying dates.

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The FICO scoring formula is widely used by lenders, and even one late payment can significantly lower your credit score. If you have a history of making late payments on your bills, your lender will probably presume that you would do the same with your mortgage payments.

9. Using all available credit on cards

Your credit score will also suffer if you go above your credit card limit or swipe it excessively. Your credit utilization ratio is one factor that influences your score (or your debt-to-credit ratio). According to your credit line, that is how much credit you have actually utilized. Your debt-to-credit ratio, for instance, would be 62.5% if you had charged $5,000 on a credit card and had a $8,000 credit limit.

That ratio should ideally not exceed 30%. And it’s crucial to maintain it as low as possible if you’re looking for a new house.

10. Closing an Account on a Credit Card

You might believe that cancelling an account will raise your credit score if you have a lot of credit card debt. But that’s not always the case.

There are some circumstances in which closing a credit card account could be a wise choice. But if you need a mortgage, it won’t help you at all. Your debt-to-credit ratio could increase if you cancel a credit card and lower the amount of credit you have available. Your credit score could therefore decline.

11. Jointly Signing a Loan

If you’re looking to buy a home, it’s especially vital to consider twice before agreeing to co-sign a loan for a college-bound child or another family member. You share some of the responsibility for that loan if you co-sign. If the borrower is unable to make payments on time and defaults, your credit score may suffer greatly.

12. Making large down payments

You can get down payment assistance from your family members. However, there are guidelines that apply to gifts for down payments. Without having the necessary paperwork, you cannot deposit the money into your account.

In general, it won’t appear good to make a sizable deposit into your bank account before meeting with a mortgage lender. The majority of the time, lenders prefer to see that you have a sizable balance in an account that has been open for at least two months.

13. Having New Credit Is Bad

Never try to obtain new credit while you are applying for a mortgage. By increasing the amount of debt you have available, opening new credit reduces your net worth. As a result, a mortgage lender may view you as a riskier investment.

As a result, you can pay higher interest rates or possibly be turned down for a loan. This includes lending your co-signer credit, which the bank will view as the same as you applying for credit on your own.

Even though you aren’t officially seeking for any new credit, it is still a terrible idea to open new bank accounts and transfer money between open accounts.

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And while we’re at it, leasing a car also fits into this broad category of avoiding new loans, even if it’s not the same as owning one.

14. Pay attention to your lender’s inquiries.

Lenders might review your credit history, salary history, and other financial details to determine whether you qualify for a mortgage. Throughout the procedure, lenders might have inquiries that need your clarification. Be sure to respond to any inquiries from the lender right away and with all the details asked.

You run the danger of having your loan application rejected or the loan procedure slowed down if you don’t respond to your lender’s inquiries or withhold the required information. Be receptive and knowledgeable as necessary to keep your mortgage going well.

15. Avoid paying outdated collection accounts.

It’s common for the old debts you owe to have a decreasing impact on your credit score over time, but it’s still a good idea to pay off old debts to start fresh and possibly just because you feel it’s the right thing to do.

To avoid jeopardizing your mortgage approval, you should postpone paying off existing obligations until after the procedure is complete. Making a payment on an old collection debt but not fully repaying it will significantly lower your credit score and refresh the debt on your credit history. Your ability to get your mortgage authorized could be impacted by this.

16. Do not be afraid to inquire

There is nothing improper about posing inquiries throughout the mortgage approval procedure. You might be agreeing to take out a sizable loan for your future house, so feel free to ask your loan officer any mortgage questions you have regarding anything you don’t grasp or that you want to comprehend in greater detail.

Your loan officer needs to be aware of your financial status, and it is only fair that you be also familiar with the loan application procedure. At the very least, answering your questions can make the situation less stressful, which will make you more enthusiastic about becoming a homeowner or receiving a better mortgage rate.

How to Get a Mortgage: Some Advice

Prospective home buyers may find the process of applying for a mortgage to be difficult and occasionally irritating, but it doesn’t have to be. You can simplify the home-buying process and make sure you’re getting a loan that fits your needs and budget by keeping in mind these mortgage suggestions.

  • Increase your deposit.
  • Boost your credit rating
  • Cut back on your expenses
  • Put your paperwork away.
  • Work with a mortgage broker
  • Get federal assistance for buying a home.
  • Utilize the Bank of your parents

Conclusion – What Not To Do When Applying For A Mortgage

It’s a big deal to get your mortgage application approved, but getting to that point can take a lot of time and effort. Remember to avoid the items we’ve discussed in this post, such as anything that can lower your credit score or raise a red signal for mortgage lenders, to make it simpler on yourself.

You’ll put yourself in an excellent position to be accepted for the house loan you desire if you can follow these recommendations and develop strong credit-building practices.


I am Mr. 9jaboizgist, a dedicated content writer and the proud owner of 9jaboizgist, a versatile blog covering a wide array of topics. With a passion for blogging and a knack for delivering up-to-the-minute information, I specialize in curating engaging content in the fields of technology, business, finance, banking, loans, insurance, and the Internet.