Too often, we see borrowers who've unknowingly sabotaged their own mortgage applications with moves that seemed perfectly reasonable at the time.
The mortgage process isn't just about qualifying once and coasting to the finish line. From the moment you start thinking about buying a home until you're holding those keys, every financial decision you make is being watched, measured, and evaluated.
Understanding what not to do is just as important as knowing what you should do. That's exactly why we've broken down the 12 most common mistakes that derail home loan approvals — and more importantly, how to avoid them at every stage of your homebuying journey.
Before You Even Apply: Foundation Mistakes
1. Not Checking Your Credit Score First
Walking into the mortgage process without knowing your credit score is like going to a job interview without reading your own resume. You might think you know what's on there, but credit reports contain surprises — and not the good kind.
Many applicants make the mistake of not checking their credit score early in the process, according to American National Bank. The fix is simple but critical: Check your credit score at least six months before you plan to apply for a mortgage. This gives you time to address any discrepancies or improve your score if needed.
You can get your free annual credit report at annualcreditreport.com, but for active monitoring during your homebuying journey, consider services that provide monthly updates. Those few extra points you gain by fixing errors or paying down debt could save you thousands in interest over the life of your loan.
2. Skipping Pre-Approval
Skipping the pre-approval process can lead to disappointment and delays. Pre-approval gives you a clear idea of how much you can afford and shows sellers that you are a serious buyer.
In today's competitive market, cash offers and pre-approved buyers often win over those still figuring out their financing. Getting pre-approved isn't just about knowing your budget — it's about proving to sellers that you're not going to waste their time with financing delays or surprises.
Our first step process walks you through exactly what pre-approval involves and how to position yourself as the strongest possible buyer from day one.
3. Maxing Out Credit Cards
High credit card balances destroy both your credit score and your debt-to-income ratio — two critical factors mortgage companies evaluate.
The math that hurts you: If you owe $5,000 on a card with a $6,000 limit, you're using 83% of your available credit. Loan officers want to see that ratio below 30%, and ideally under 10% for the best rates.
Keep your credit usage low to get a better mortgage rate and stronger approval odds. Your credit utilization affects your score immediately, so paying down balances before you apply can make a real difference in your loan terms.
During the Application Process: Timing Is Everything
4. Making Large Purchases
Getting a new line of credit or buying big-ticket items like cars, furniture, or appliances changes your debt-to-income ratio (DTI). That new monthly payment affects your qualifying ratios.
Here's what happens: People with new debt have higher DTI ratios compared to their monthly income. Since higher ratios make for riskier loans, borrowers may no longer qualify for their home loan.
The temptation is real — you're excited about your new home and want to start planning. Resist the urge to splurge on furniture or appliances until after closing.
5. Opening New Credit Accounts
When multiple organizations run your credit report, it impacts your FICO® score. Lower credit scores can determine your interest rate and possibly even your eligibility for approval.
Every hard inquiry can drop your score by a few points. Multiple inquiries in different categories (like auto loans plus credit cards) compound the damage.
Smart strategy: If you need to shop for mortgage rates, do it within a 14 - 45 day window when multiple mortgage inquiries count as a single inquiry.
6. Changing Jobs
Why this matters: Switching employers or changing to a new pay structure affects your ability to repay the loan. Your mortgage lender will verify your employment just days before closing.
Without a guaranteed source of income, you could lose your entire approval. Even if your new job pays more, income changes require documentation and explanation that can delay closing.
The fix: If possible, avoid changing jobs during your mortgage application. If a job change is unavoidable, inform your loan officer immediately so they can assess how it affects your approval.
7. Moving Money Without Documentation
The problem: Any significant bank transfers, even between your own accounts, must be documented to comply with underwriting guidelines.
Large deposits especially raise red flags. An unusually large deposit may suggest your balance doesn't reflect your actual situation.
Before you move any money, speak with your loan officer. Even transferring your own funds between accounts creates paperwork headaches that can delay closing.
After Pre-Approval Through Closing: Don't Coast To the Finish Line
8. Co-Signing for Others
When you co-sign a loan, you become legally responsible for that debt. This increases your DTI ratio, even if you promise you won't make the payments.
From your loan officer's perspective, you're now responsible for both your mortgage payment and whatever you co-signed for. That favor for your college-bound kid or family member with credit challenges can torpedo your own mortgage approval.
Wait until after closing to help others with their credit needs.
9. Closing Old Credit Cards
Many buyers believe having less available credit makes them less risky and more likely to be approved. This isn't true. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those parts of your score.
Keep those old accounts open and active with small, regular purchases. Your credit score depends on both the length of your credit history and your total available credit.
10. Making Late Payments on Anything
Even a 30-day late on a $12 bill can derail your entire application. Payment history is a huge part of your credit score. Your payment history accounts for 35% of your credit score, according to FICO, so paying bills on time and in full can prime your credit before you file a mortgage application.
Set up autopay for everything during your mortgage process. Yes, even that small utility bill or subscription service. Lenders pull credit again right before closing, and any new late payments can halt everything.
11. Large Undocumented Deposits
Lenders generally require documentation for funds held in bank accounts to ensure transparency and accuracy in assessing your financial situation. Cash deposits are particularly problematic because lenders need to source your money, and cash isn't easily traceable.
Whether it's cash gifts from family, side income, or money you've been keeping under the mattress, get documentation before depositing anything substantial. Gift letters, deposit slips, and paper trails make everyone's life easier.
12. Not Communicating Changes Immediately
Transparency prevents disasters. Be upfront about any changes that occur during your mortgage process: income blips, asset changes, or credit issues should be reviewed immediately.
This is where having the right team makes all the difference. Consistent, honest communication with your mortgage loan officer can prevent most problems before they derail your approval.
Our experienced team has guided thousands of first-time homebuyers through every possible scenario. We'd rather troubleshoot a potential issue early than scramble to fix problems at closing.
Staying on Track: Your Action Plan
Getting organized early prevents most of these mortgage mistakes from happening in the first place. Our documentation guide walks you through exactly what you'll need and when you'll need it, so you're never caught off guard by last-minute requests.
The bottom line: The mortgage process doesn't have to be a minefield of potential mistakes. With the right preparation, clear communication, and a team that treats your homeownership goals seriously, you can navigate from application to closing without the stress and surprises that derail other buyers.
Ready to start your home loan journey the right way? Take the first step with confidence, knowing you've got guides who've seen every possible scenario and know exactly how to get you home.