9 Dumb Moves That Kill Hopes of Landing a Great Mortgage

If you are shopping for a home, chances are good that you’ll need a mortgage. Finding the right home loan is crucial to making the homebuying process a financial success.

But fall victim to any of the following mistakes, and you soon could be crying the blues. Following are some dumb mortgage mistakes you should avoid at all costs.

1. Not checking your credit

The first thing lenders will do is check your credit report, so it’s dumb not to know what’s in there before they look at it. Order your credit reports six months to a year before you apply for a mortgage, getting free copies through AnnualCreditReport.com.

Once you’ve got your credit report in hand, make it shine. Dispute any errors with the credit reporting agencies. Settle accounts and, if possible, negotiate removal of negative comments when you do. Pay down as much debt as you can, and pay your bills on time every month. The higher your credit score, the better chance you have of getting both a good loan and a favorable rate.

For tips on what not to do, check out “11 Surprising Ways to Wreck Your Credit Score.”

2. Ignoring your rental history

If you’re currently renting, ignoring your rental history can be a mistake. A friend of mine once applied for a mortgage through the U.S. Department of Agriculture. She had to get a letter of recommendation from her landlord and a year’s worth of bank statements showing she had paid the rent on time before she could be approved. Make sure you are paying your rent on time every month leading up to a mortgage application.

3. Job-hopping

Lenders like to see steady employment and a solid source of income. If you have recently switched career paths — or have a habit of switching jobs every few months — they might see your employment history as a sign you won’t be able to repay your loan.

We’re not saying stick with a job you hate forever, but try and hold out until after you secure a mortgage.

4. Shortchanging your down payment

You’ll need at least 20 percent down to qualify for the many conventional mortgages. Make sure you have it in the bank before you start shopping for a loan.

5. Not getting preapproved

Would you go to the mall without your wallet? That’s what you’re doing when you shop for houses without having the financing arranged.

When you are preapproved by a lender, you know how much you qualify for, which makes house shopping a lot easier. Without preapproval, you could end up wasting time looking at houses out of your price range — or worse yet, lose out on a great deal while you scramble trying to find mortgage money.

6. Not shopping around

Mortgage rates and terms vary by lender. Some lenders may have tighter requirements and offer you higher interest rates, while other lenders might think you’re a safe bet and offer you better rates.

Don’t sign up for a mortgage without shopping around first. We make it easy with the lender search page in our Solutions Center. Here, you can look for the lender that will offer you the best rate.

7. Ignoring fees

Your interest rate isn’t the only charge you’ll see on your mortgage. A home loan is also loaded with fees such as:

  • Appraisal — the lender will hire a third-party appraiser, but you’ll pay the bill
  • Credit report fee — for checking your credit
  • Loan origination fee — the fee for starting a new loan
  • Processing fee — covers the cost of paperwork
  • Underwriting fee — for final analysis and approval
  • Wire-transfer fee — for moving money around

And those are just a few examples. Experts say fees can equal 3 to 5 percent of your total loan amount — a big number. Don’t agree to a loan without first getting all fees in writing. If they’re too high, negotiate them down or take your business elsewhere.

Many mortgage fees are simply add-ons to make extra money for the lender. So, challenge them. One good technique is to pit lenders against each other.

8. Not locking in

Mortgage rates change often. The rate you’re quoted when you’re shopping often can change — for better or worse — before the loan closes. But you can avoid this uncertainty by locking in your rate.

Most lenders will allow you to lock rates in for 30 to 45 days. But be sure you can close the property within that window. If you can’t, continuing the lock could cost extra. So when you’re negotiating your loan and fees, consider attempting to negotiate a longer lock as well.

9. Taking on more than you can afford

Lenders, like real estate agents, are in the sales business — the more you buy and borrow, the more they make.

Don’t assume that because you qualify for a $500,000 mortgage it’s the best deal for you. Do your own math and make sure you can comfortably afford your payments before you sign up.

What was your biggest mistake when shopping for a mortgage? Sound off in comments below or on our Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
The 3 Worst Money Mistakes You Are Making at the Gas Station
The 3 Worst Money Mistakes You Are Making at the Gas Station

Beware these cash-guzzling missteps when you stop at any gas station.

10 Expenses You Should Not Put on a Credit Card
10 Expenses You Should Not Put on a Credit Card

Sometimes it’s simply safer to keep the plastic tucked away.

16 Affordable Products That Could Save Your Life
16 Affordable Products That Could Save Your Life

You’ll want to order these sometimes surprising products from Amazon ASAP.

Beware These 3 Tax Penalties on Retirement Accounts
Beware These 3 Tax Penalties on Retirement Accounts

Protecting a nest egg is tough — but you can make the situation far worse with some boneheaded mistakes.

7 Gadgets Under $60 That Can Boost Your Health
7 Gadgets Under $60 That Can Boost Your Health

These Amazon finds can help ease foot aches, boost energy and even protect your heart.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Whether you resell it for a big profit or add it to your own wardrobe, this type of clothing is a hidden steal.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

Organize Your Home With These 10 Thrift Store Finds
Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

11 Laws You Could Be Breaking Without Knowing It
11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

Is This Treatable Condition Causing Your High Blood Pressure?
Is This Treatable Condition Causing Your High Blood Pressure?

Researchers say too many doctors are overlooking this potential source of hypertension.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

These Are the 3 Best Used Cars You Can Buy
These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

Taking a Multivitamin? Here’s Why You Should Reconsider
Taking a Multivitamin? Here’s Why You Should Reconsider

A new study has bad news for the millions of Americans who spend money on multivitamins.

This Surprise Factor Can Raise Your Risk of Dementia
This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

21 Items to Cut From Your Budget That You Won’t Even Miss
21 Items to Cut From Your Budget That You Won’t Even Miss

Start off the new year by implementing these small-but-smart savings strategies. They’ll soon add up.

Does Wearing 2 Masks Protect You Better From COVID-19?
Does Wearing 2 Masks Protect You Better From COVID-19?

A growing number of people are wearing two masks instead of just one. Should you join them?

This Is America’s New Favorite Grocery Store
This Is America’s New Favorite Grocery Store

Consumers say a familiar name has become their go-to source of grocery items.

Internet Providers Can’t Charge You for This Anymore
Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

15 Painless Ways You Can Cut Costs in 2021
15 Painless Ways You Can Cut Costs in 2021

Follow these tips to save, so you’ll have money for things that really matter.

10 Cars You Are Most Likely to Keep for 15 Years
10 Cars You Are Most Likely to Keep for 15 Years

The cars that owners hold onto the longest have one thing in common, a new study shows.

Prepare to Pay More for These 31 Drugs in 2021
Prepare to Pay More for These 31 Drugs in 2021

More than 700 prescription medications have seen price hikes so far this year. Here’s a look at the worst.

The 10 Golden Rules of Becoming a Millionaire
The 10 Golden Rules of Becoming a Millionaire

I’m a millionaire several times over. I got here the same way you can — by following these simple steps.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.