Getting pre-approved for a mortgage is probably one of the most important parts of the home-buying process. Without taking this necessary step, your budget will be unclear. You won’t have a clear idea of what you can actually afford, how much money you should set aside for your down payment, and what type of mortgages you would even qualify for. Still, there are quite a few mistakes that home buyers make when they apply and even after they get pre-approved, so make sure you know what you’re doing.
When you apply for pre-approval, a mortgage lender will review your finances, including your tax returns, and credit report, so try not to make certain decisions—financial and otherwise—that could jeopardize your chances of meeting the requirements.
Here are some mortgage pre-approval mistakes that you should avoid:
- 1. Lying to Your Lender. Any lies you tell your lender won’t go unnoticed because he or she will be taking a close look at your financial history. Besides, part of a lender’s job is to help people who do not initially qualify for pre-approval and point them in the right direction. But in order for your lender to do this, you need to be absolutely honest. Don't leave any necessary information out.
- 2. Applying at the Last Minute. Don’t wait until you find a house listing you want to make an offer on. Even though the pre-approval process isn’t typically time-consuming, you risk losing out on a home you really like if you didn’t get pre-approved in advance. Plus, you may not qualify, which means that you would need to turn your attention away from house hunting and toward meeting those prerequisites. So, if you want to move in the spring, the latest you should get pre-approved is in the winter. If you want to move in the fall, try to get pre-approved in the summer. That way, you won’t have to worry about doing it after you find a piece of real estate that could potentially be your new home.
- 3. Stop Paying Your Bills on Time. Whether you plan on applying for a mortgage pre-approval in the near future or have already been pre-approved, do not stop paying your bills on time. Missing deadlines or failing to pay at least the minimum amount will hurt your credit.
- 4. Maxing Out Your Credit Cards. Similarly to missing payments, don’t start making large purchases or maxing out your credit cards. Again, this negatively affects your credit and decreases the possibility of securing a mortgage pre-approval. Wherever you are in the home-buying process, changing your spending habits—unless that means cutting back on unnecessary expenses—is not recommended.
- 5. Switching Jobs. This isn’t the best time to look for another job. Lenders want to see financial stability and consistency, so someone who is between jobs may not get pre-approved. Consider holding off on the job hunt until after you’ve settled into your new home.