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14 Mistakes to Avoid During Mortgage Approval

May 13, 2025 by admin

14 Mistakes to Avoid During Mortgage Approval
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14 Mistakes to Avoid During Mortgage Approval

Buying a home is an exciting milestone, but the process of securing a mortgage can be stressful and full of pitfalls. As a Realtor who has guided countless buyers through this journey, I’ve seen how seemingly minor missteps can delay or derail a loan approval, sometimes even costing buyers their dream home. Once your mortgage application is in motion, your financial profile is under scrutiny until the loan closes. That’s why it’s critical to avoid certain actions that could raise red flags for your lender during your mortgage approval process.

Here’s what you shouldn’t do during the loan approval process and why playing it safe can help you move into your new home without unexpected delays.

14 Mistakes to Avoid During Mortgage Approval

1. Don’t Make Large Purchases

It might be tempting to start buying furniture, appliances, or even a new car, but doing so could jeopardize your home loan. Any large purchase, especially one that requires financing, can increase your debt-to-income (DTI) ratio and lower your credit score. Lenders review your credit profile right before closing, and a sudden change could trigger a denial, even after pre-approval.

What to do instead:
Wait until after your home closes before making any major financial decisions or purchases. Your lender needs to see stability.

2. Don’t Change Jobs or Employment Type

Switching jobs or going from a salaried position to contract or self-employment during the mortgage process can be a red flag to lenders. Even if the new job pays more, lenders are primarily concerned with employment stability and predictability.

What to do instead:
If a job change is unavoidable, speak with your lender and Realtor beforehand. They may be able to advise you on how it will affect your loan approval.

3. Don’t Deposit Large Sums of Cash

Lenders are required to verify the source of funds in your bank account, especially when it comes to your down payment and closing costs. Large or unexplained cash deposits can raise concerns about money laundering or undisclosed loans.

What to do instead:
If you receive a gift or bonus, document it thoroughly. Your lender will likely require a paper trail, including signed gift letters or evidence of direct deposit.

4. Don’t Miss Any Bill Payments

Your credit is continuously monitored throughout the approval process, and just one missed payment on a credit card, car loan, or other account can hurt your score. That change in creditworthiness can impact your loan terms or cause a denial.

What to do instead:
Set up automatic payments or reminders to ensure everything stays current. Even if you’re busy with the moving process, your payment history must remain spotless.

5. Don’t Apply for New Credit

Opening a new line of credit—whether it’s a retail card, personal loan, or car lease—can affect your credit score and DTI ratio. Every new inquiry also shows up on your credit report, which lenders will see.

What to do instead:
Hold off on applying for any new credit accounts until your home loan has closed. This includes “pre-approved” offers that arrive in the mail.

6. Don’t Co-Sign for Anyone Else

Co-signing a loan for a friend or family member may seem harmless, but it creates new financial responsibility for you—even if you’re not making the payments. Lenders will count that debt against your DTI, which could cause your loan to be denied.

What to do instead:
Politely decline any requests to co-sign until after your loan has closed and your home purchase is complete.

7. Don’t Move Money Between Accounts Without Explanation

Transferring large sums between bank accounts can confuse your lender and complicate the underwriting process. It may also require additional documentation that could delay closing.

What to do instead:
If you must move money, make sure you can clearly document each transaction. Talk to your lender ahead of time to ensure it won’t create unnecessary issues.

8. Don’t Ignore Your Lender’s Requests

Mortgage lenders may ask for additional documents or clarifications at any time during the approval process. Delaying your response can result in missed deadlines or even losing the home if your closing gets pushed back.

What to do instead:
Stay in close communication with your lender. Respond to all requests promptly and provide accurate information to keep the process moving forward.

9. Don’t Assume Pre-Approval Is a Guarantee

Getting pre-approved is a great start, but it’s not a loan commitment. The underwriter still needs to verify your income, assets, debts, and property details. Pre-approval simply means you meet the basic qualifications at that moment.

What to do instead:
Treat your pre-approval like a conditional green light. Avoid anything that could change your financial situation until after closing.

10. Don’t Overextend Your Budget

Just because you’re approved for a certain loan amount doesn’t mean you should borrow the full amount. Maxing out your budget can leave you with little wiggle room for unexpected expenses or emergencies after you move in.

What to do instead:
Work with your Realtor to find a home that fits comfortably within your financial comfort zone—not just your lender’s maximum.

11. Don’t Lie or Withhold Information

Attempting to hide debts, change job details, or provide false information to your lender is considered mortgage fraud. Even an unintentional omission can delay or derail your approval.

What to do instead:
Be upfront and transparent with your lender from the beginning. If anything changes during the process, let them know right away so it can be addressed properly.

12. Don’t Overlook the Importance of Credit Monitoring

Lenders often do a final credit check just before closing. If your score drops because of a new account, high balances, or missed payments, it can be grounds for denial—no matter how far along you are in the process.

What to do instead:
Avoid any behavior that might cause your credit score to dip, and continue monitoring it closely during the mortgage process.

13. Don’t Assume Gift Funds Are Automatically Approved

Many buyers use gift funds from family to help with their down payment or closing costs. However, lenders have specific rules about how gift money must be documented and sourced.

What to do instead:
Let your lender know early if you plan to use gift funds. You’ll likely need a gift letter and proof of the donor’s ability to provide the funds.

14. Don’t Schedule Major Life Events Around Closing Day

Buying a home is a big event in itself. Adding a wedding, vacation, or major surgery around the same time can increase stress and make it harder to provide documentation or attend closing appointments.

What to do instead:
Keep your calendar clear and flexible until the deal is finalized. After closing, you’ll have plenty of time to celebrate.

Final Thoughts

The loan approval process can feel overwhelming, especially for first-time buyers. But with the right guidance and by avoiding these common mistakes, you’ll stay on track toward closing. As your Realtor, my role is to help you navigate these complexities, answer your questions, and connect you with a trusted lender who can keep everything moving smoothly.

Remember, buying a home isn’t just about finding the right property. It’s also about making smart financial decisions from contract to closing. If you’re ever unsure whether a financial move will affect your mortgage, ask your lender or your Realtor. It’s always better to be safe than sorry.

If you’re thinking about buying a home and want professional guidance from start to finish, feel free to reach out. I’d be happy to walk you through every step of the process, without surprises.

Please consider spreading the word and sharing; 14 Mistakes to Avoid During Mortgage Approval

About the Author

The above real estate article, “14 Mistakes to Avoid During Mortgage Approval,” was written by Michelle Gibson. She has specialized in residential real estate throughout Palm Beach County since 2001. Michelle assists buyers and sellers, landlords, and tenants. She would love to share her expertise and guide you through buying, selling, or renting a home.

Our brokerage services the following areas: Wellington, Lake Worth, Royal Palm Beach, Boynton Beach, West Palm Beach, Loxahatchee, Greenacres, Jupiter, Palm Beach Gardens, and more.

14 Mistakes to Avoid During Mortgage Approval

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ABOUT

Michelle Gibson is a full time REALTOR with the Hansen Real Estate Group Inc. who has been specializing in residential real estate throughout the Central Palm Beach County area since 2001 assisting Buyers, Sellers, Landlords and Tenants with their real estate needs.

IMPORTANT NOTICE

Hansen Real Estate Group Inc. is not associated with the government and our services have not been approved by the government or your lender. If you stop paying your mortgage you could lose your home and damage your credit. Your lender may not agree to the change of your loan and/or a short sale. There are no guarantees with a short sale and we cannot provide legal advice please seek legal advice.
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