10 Common Mortgage Mistakes
First-Time Buyers Make

Not Checking Credit Early Enough

Many first-time buyers don't think about their credit score until they're ready to apply. By then, there may not be enough time to address errors or improve their profile before submitting a loan application.

Even small issues — like an incorrect account balance, a disputed payment, or an old collection — can take weeks or months to resolve through the credit bureaus.

• Pull your free credit report at annualcreditreport.com at least 6–12 months before you plan to buy
• Review all three bureaus — Experian, Equifax, and TransUnion
• Dispute any inaccuracies in writing and follow up
• Address derogatory items before applying

Opening New Credit Accounts Before or During the Process

It can be tempting to open a new credit card, finance furniture, or take out an auto loan while you're shopping for a home. However, new credit inquiries and accounts can temporarily lower your credit score and change your debt-to-income ratio — both of which lenders monitor closely.

This can be particularly problematic if it happens after you've been pre-approved but before your loan closes. Lenders often re-verify credit just before closing.

Waiting Until You Have 20% Down

Many first-time buyers delay purchasing because they believe a 20% down payment is required. In reality, many loan programs allow much smaller down payments — some as low as 3%, or even 0% for eligible veterans.

In high-cost markets like Southern California, waiting to save a full 20% down payment can mean years of continued rent payments while home prices continue to rise. For many buyers, the cost of waiting outweighs the benefit of a larger down payment.

Common low down payment options include:

• FHA loans — as little as 3.5% down with flexible credit requirements
• Conventional loans — as low as 3% for qualified first-time buyers
• VA loans — 0% down for eligible veterans and active military

Private mortgage insurance (PMI) on a conventional loan can generally be removed once you reach 20% equity in the home, so a smaller down payment does not mean paying PMI forever.

Not Getting Pre-Approved Before Shopping

Many first-time buyers start touring homes before they have any sense of what they can borrow. This can lead to falling in love with a home that's out of budget, or missing out on a home because a competing buyer had a pre-approval letter in hand.

A pre-approval is a formal review of your income, credit, and assets that results in a written commitment from a lender. It's different from a pre-qualification, which is a more informal estimate that is not based on verified documentation.

In competitive markets like Southern California, many sellers expect buyers to already have a mortgage pre-approval before submitting an offer. Without one, buyers may lose out to more prepared competitors.

• Pre-approval shows sellers you're serious and financially ready
• Helps you set a realistic budget before falling in love with a home
• Many sellers in Southern California will not consider offers without one

Underestimating Closing Costs

Many first-time buyers focus primarily on the down payment when saving for a home, but closing costs can add several thousand dollars to the amount needed at closing. These are fees associated with processing and completing the mortgage transaction and are typically paid out of pocket at close.

Closing costs typically range from 2% to 5% of the loan amount and may include lender fees, title and escrow fees, prepaid taxes, insurance, and government recording fees.

• On a $600,000 home, closing costs could range from $12,000 to $30,000
• Costs vary depending on the lender, loan program, and location
• Some costs may be negotiated or covered through seller concessions

Underestimating the Total Cash Needed

First-time buyers often focus on the down payment and forget about the other upfront costs involved in buying a home. This can leave buyers short of funds at closing.

In addition to the down payment, buyers should plan for:

• Closing costs — typically 2% to 5% of the loan amount
• Earnest money deposit — due at offer acceptance (often around 2% of the purchase price)
• Home inspection fees
• Moving costs and initial home expenses
• Reserves — some loan programs require proof of savings after closing

Making Large or Unexplained Deposits

Mortgage lenders are required to document and verify the source of all funds used to purchase a home. Large or irregular deposits in your bank statements — even legitimate ones — can raise questions during underwriting if they can't be clearly explained.

Common examples that may require additional documentation:

• Cash deposits
• Transfers from family members without a gift letter
• Lump-sum payments without clear documentation
• Large transfers between personal accounts shortly before application

Changing Jobs During the Process

Employment stability is a key factor in mortgage approval. Changing jobs — even for a higher-paying position — can complicate or delay the underwriting process, particularly if the new role is in a different industry or involves a change from salaried to self-employed income.

Situations that can create complications:

• Switching from a salaried position to self-employment
• Moving to a commission-based role without a history in that structure
• Accepting a job in a completely different field
• Changing employers during the final stages of loan processing

Skipping the Home Inspection

In competitive markets, some buyers waive the home inspection to make their offer more attractive. While this may strengthen an offer, it also means accepting the property as-is — with no opportunity to negotiate repairs or back out based on the home's condition.

A professional home inspection can uncover:

• Structural issues or foundation concerns
• Roof condition and remaining lifespan
• Plumbing, electrical, and HVAC system issues
• Signs of water intrusion or mold

Making Major Financial Changes Before Closing

Once your loan is in underwriting, lenders continue monitoring your financial profile until closing. Changes that occur during this period can trigger additional conditions or — in some cases — affect approval.

Avoid the following between application and closing:

• Opening new credit accounts or applying for additional credit
• Financing large purchases (furniture, appliances, vehicles)
• Making large deposits or transfers without documentation
• Changing jobs or significantly altering your income structure
• Paying off large debts without first consulting your lender

Maintaining financial stability from application to close is one of the most important things a buyer can do to keep the process on track.