To secure your California mortgage, avoid what to avoid during the mortgage approval process: taking on new debt, changing jobs, depositing large sums of cash, missing payments, closing credit accounts, skipping inspections, underestimating closing costs, shifting funds, neglecting rate locks, and not reading loan terms. Maintaining financial stability and clear documentation is crucial for a smooth approval.
So, what can derail your home loan? Plenty! And most of it comes down to easily avoidable alifornia mortgage mistakes. Whether you’re buying your first home or refinancing, skipping these common pitfalls can save you from major headaches.
What Can Delay or Derail Your
California Mortgage
Lenders look at your entire financial picture—your income, debts, credit score, and even your spending habits. Small mistakes can send up red flags, causing costly delays. Here’s what not to do.
1. Taking On New Debt
Big mistake. Don’t get a new car, finance furniture, or open store credit cards just because you’re excited about your new home. That extra debt can change your debt-to-income ratio, which is a key number lenders check.
2. Changing Jobs Before Closing
A new job might pay more, but lenders love stability. A sudden job switch can make them nervous, especially if it’s Commission-based or 1099 instead of W-2.
3. Depositing Large Amounts of Cash
If you suddenly deposit $10,000 in cash, California mortgage your lender will want to know where it came from. Unverified funds can trigger a red flag, creating unnecessary delays.
4. Missing a Bill Payment
Your credit score needs to stay solid from pre-approval to closing. A missed bill—even a small one—can cause your credit score to dip, affecting your California mortgage terms.
5. Closing Old Credit Accounts
You might think paying off debt and closing old accounts is smart, but it can actually hurt your credit score by shortening your credit history and affecting your credit utilization ratio.
6. Skipping the Home Inspection
Some buyers waive inspections in competitive markets. Not smart. You could end up with a house that needs costly repairs, forcing you back to square one.
7. Underestimating Closing Costs
Your down payment isn’t the only expense. Closing costs—appraisal, title insurance, property taxes—can add up. Make sure you budget 2-5% of your home’s price for these costs.
8. Changing Banks or Moving Money Around
Lenders track your financial history. If you suddenly shift large amounts of money between accounts, they may require you to explain every transaction, slowing things down.
9. Not Locking in Your Interest Rate
Interest rates change. If you don’t lock in a rate early, a sudden increase could make your mortgage less affordable or even disqualify you.
10. Not Reading the Loan Terms
Assuming you understand everything can be costly. Read your loan offer. Small details in the terms can make a big difference in your payments and penalties.
How to Keep Your Mortgage Smooth
If you’re getting a mortgage in California, avoid these common pitfalls to make sure the process goes smoothly.
- Keep your job and income stable.
- Pay bills on time and keep your credit score strong.
- Avoid large purchases before closing.
- Don’t move money around without documenting it.
- Get a home inspection before committing.
- Budget for closing costs and other unexpected expenses.
FAQs
What credit score do I need for a mortgage?
Most lenders prefer a credit score of 620 or higher, but the better your score, the better your loan terms.
Can I change jobs during the mortgage process?
It’s risky. A job change, especially if it comes with a new pay structure, can make lenders nervous.
Should I pay off all debt before applying?
Not always. Paying off all debt could lower your credit score and affect your debt-to-income ratio.
Can I get a mortgage if I’m self-employed?
Yes, but you’ll need solid proof of income—usually two years of tax returns showing stable earnings.
Do mortgage pre-approvals expire?
Yes, usually in 60-90 days. If time runs out, you might have to reapply with updated financial information.
Avoiding these mistakes can help you reach the finish line faster. Want more tips on buying and investing in real estate? Check out our blog for more insights.