Don’t make these no-brainer mortgage mistakes: 12 dos and don’ts

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It’s a good time to be a homebuyer. Mortgage rates are still around historic lows, and in what was usually supposed to be a slow winter season, homebuyer traffic has stayed up. Housing affordability is also at a high.*

Working with a great lender and knowing what you want in a mortgage is a winning combination. But even after you’ve found the right lender, the second part can still be tricky. How do you know what to look for in a mortgage when there are so many options to choose from?

Do these 6 things before you decide on a mortgage

Sticking with our best-practice dos and don’ts, based on our 33 years of experience as a leading lender, can simplify the process of picking a mortgage:

1. Do keep an eye on your credit.

• You’re entitled to a free credit report each year by federal law from one of the top three credit reporting agencies in the U.S. Having a better grasp on your credit score puts you in the driver’s seat.
• Your credit score can affect your mortgage rate. This can impact your monthly mortgage payment, for better or for worse.
• Checking in on your credit annually can give you time to improve your score. Or fix any errors. AnnualCreditReport.com is authorized by federal law to provide a free yearly credit report to the public.

2. Do choose a lender based on reputation.

• Real estate is all about location, location, location. And mortgage lenders are all about reputation, reputation, reputation.
• Looking into a lender’s rep is one key way to protect yourself from predatory lending. Reading customer reviews (and asking for references) is a smart place to start.
• Our company, for example, is award-winning and community-driven. Our loan officers, like Marcie, are known for their warmth, connection, and how much they truly care.

3. Do continue to pay your mortgage or rent on time.

• Life happens. But even one 30-day-late payment on a credit card or another loan could set you back in your mortgage qualification.
• Paying your rent more than 30-days late within the past year might affect your loan terms, resulting in a higher down payment or interest rate.
• A mortgage application will typically be denied if a borrower has three or more 30-day-late payments in the last 12 months.

4. Do get prequalified first.

• Prequalifying for a home loan before you start searching for houses can make it that much easier to nab your dream home when it becomes available.
• In a nutshell, a home loan prequalification tells you how much house you can afford before you begin shopping.
• Because there’s currently a lack of inventory in the housing market, buyers need an advantage; prequalifying first could strengthen your offer by showing a seller you’re prepared.

Keep it simple: Use our free LoanFly app to prequalify remotely.

5. Do keep track of all your paperwork.

• After you prequalify, your loan officer is going to ask you for several important documents to get the loan process moving.
• Gather your Social Security Card, work history, employer information, pay stubs, bank statements, and tax returns to avoid scrambling at the last minute.
• At this time, it’s also important not to change bank accounts: Your loan officer needs to source your assets, which can be difficult when paper trails are inconsistent.

6. Do notify your loan officer of any big changes in your life.

• If you hope to get into a new home without delays, try not to rock the boat for a little while.
• Changing jobs, moving, and even switching insurance companies are all boat-rocking variables that could delay your mortgage approval and affect interest rates.
• Interestingly, closing a credit account can also count as a big life change — negatively impacting your credit score by altering scoring factors like your percentage of available credit and length of credit history.

Don’t waste your time making these 6 mortgage mistakes

If it all possible:

1. Don’t start house-hunting before you know what you can afford.

• Once again, that’s the beauty of getting prequalified. It’s quick. It’s easy to do online or via an app.
• And ultimately, it’s going to tell you exactly how much you can afford so that you don’t lose valuable time viewing houses out of your price bracket.
• Taking the steps beyond early prequalification to early loan approval is an even better bet in today’s still-booming market, helping you to gain a competitive edge by acting as a cash buyer.

2. Don’t take mortgage advice from just anyone.

• It’s a bitter pill to swallow. But it’s never a good idea to take your mortgage advice from a friend, a hairdresser, or even a real-estate-savvy neighbor.
• You’re making one of the biggest investments of your life. So, get your mortgage information and rate quote straight from the source — your lender.
• Homebuyers who are better informed are more likely to get better financial terms on their mortgage; you could save as much as $44,500 over the life of your loan just by shopping around and finding your preferred lender.

3. Don’t make any major purchases.

• Remember that thing about not rocking the boat? Buying a new car, appliances, or furniture before signing your home loan contract could impact your financial criteria for qualification.
• Taking on new debt signifies that you’re increasing your monthly obligations. Additional obligations may trigger new qualifications for a mortgage.
• If you have more debt, this could increase your DTI, or debt-to-income ratio. A higher DTI makes a loan risker; in some cases, a previously qualified borrower might not qualify.

4. Don’t apply for a new line of credit or loan.

• Likewise, taking out a new line of credit or a new loan, whether it’s for a car or education, can change your current financial picture. Changes in your finances may indicate instability and could delay or influence the loan process.
• It’s also critical that you don’t deposit cash into any accounts before running it by your loan officer. A lender needs to track your funds, and cash is hard to trace.
• Before making a cash deposit, talk with your loan officer. They’ll let you know how they’d like you to document the transaction.

5. Don’t drain your savings.

• All that money you saved for a rainy day can go toward your down payment and closing costs.
• If you have little-to-nothing in savings at the moment, we suggest checking out a big-picture budgeting app like Mint.
• Any cash you can set aside may help to offset the often-unexpected costs that arise when buying a house.

6. Don’t be a stranger.

• There’s no such thing as a stupid question. And there’s no wrong time to contact your loan officer.
• That’s what we’re here for. If you have any questions about your mortgage quote, or if you foresee any life changes coming up, give us a shout.
• We’re the professionals who can troubleshoot and keep you on track, helping you to reach your closing day on time.

Looking for a mortgage that fits just right?

Start by chatting with one of our friendly loan officers. We can walk you through the dos and don’ts, help you find a low rate, and save you from wasting time and money on the wrong mortgage.

*“Tell your clients: It hasn’t been this affordable to buy a house in years.” HouseLoanBlog.net, 2020.

For educational purposes only. Please contact your qualified professional for specific guidance.

Sources are deemed reliable but not guaranteed.