Common Mortgage Mistakes That Hurt Approval Chances

Getting approved for a mortgage is stressful. Pulling together all the documents is only part of the mortgage process. What trips up many buyers isn’t poor credit, but small actions they didn’t realize could work against them. If a potential home buyer is figuring out how to get approved for a home loan, they shouldn’t just focus on credit scores and income. Lenders comb through recent bank activity to judge how you manage money day to day. Even if a person has built a solid credit score and saved enough for a down payment, small financial decisions can still raise red flags. Also, many mortgage mistakes happen in the final stretch when buyers least expect them. They can delay approval or cause an application to be rejected entirely. Here’s what to avoid when applying for a mortgage.

Making a Career Move at the Wrong Time

Lenders don’t just want to see that potential homebuyers are employed; they want to see a consistent, uninterrupted history. One of the most overlooked mortgage approval tips is to stay put in a job while applying. Career changes may look good on paper, but they can count as mortgage mistakes to avoid. Switching jobs or launching a new business right before or during an application sends a message of instability. It’s especially risky if moving from a salaried role to a self-employed one. Even if an income improves, lenders can’t use it until you’ve established a two-year track record. Some borrowers don’t realize that even a better-paying job can stall their application if the pay structure changes from salary to commission or includes a probationary period. Stick with your current employer until after your loan is funded. If a person must change jobs, make sure the new one is in the same field and has equal or better compensation.

Misplacing Tax Documents

Tax returns and W-2s are proof of earning history. Lenders use these to verify income, and the IRS transcripts they pull don’t include all the employer details they need. If someone has had multiple jobs in the last two years, not having the returns handy can slow everything down. Many applicants assume that online access to IRS records or payroll systems will fill the gap, but they don’t always provide complete information. Keep at least two to three years of tax documents on file. Also, include any 1099s, especially if  there’s any freelance work that doesn’t show up on W-2s. Not keeping these on hand is one of those common mortgage mistakes that seems minor but can slow a loan approval to a crawl.

Adding New Debt When You Should Be Locking Things Down

Applying for a mortgage is not the time to buy a car, open a new credit card, or co-sign a loan. Every new debt raises your debt-to-income ratio and signals risk to the lender. Some people think small balances or promotional 0% interest offers don’t count, but they do. Even unused credit lines that show up as recent inquiries can raise questions. Co-signing for someone else, even if they make all the payments, still makes you legally responsible. Lenders can assume a person might have to step in if they default. That obligation can tank a loan approval, even if a person’s own finances are strong. One of the best mortgage approval tips is to freeze your financial profile; no big changes, no new accounts. This is one of the most common mortgage mistakes people make right before closing.

Paying Off Debt Without a Plan

It sounds smart to pay off debt to improve a your own financial profile, but doing it the wrong way can backfire. If a person drains thier savings to clear balances, they may no longer meet reserve requirements. Lenders want to see that a person can keep making mortgage payments if income takes a hit. Some people mistakenly assume that being debt-free always helps, but credit scores also reward responsible use of credit, not just zero balances. If you want to know how to get approved for a home loan without setbacks, talk to your lender before moving money around. They can run simulations to find which debts are worth paying off. Often, paying down high-utilization accounts and keeping reserves intact is a better path.

Depositing Cash Without Documentation

Large deposits during the mortgage process will raise red flags unless you can explain exactly where the money came from. Lenders want to make sure the funds aren’t borrowed or part of some side agreement. Even gifts from family members need proper documentation. Deposits in round numbers, like $3,000 or $5,000, look suspicious if they don’t match your regular income patterns. Cash pulled from a safe or mattress won’t help unless you can prove the source.

Unusual Bank Transactions

Overcomplicating your bank records is one of those mortgage mistakes that people only realize after it causes delays. Every transfer between accounts becomes a breadcrumb trail that the lender has to follow. This gets worse if you move funds between joint and individual accounts, business and personal accounts, or accounts that aren’t in your name. The more complicated the trail, the more paperwork you’ll have to produce. Transfers from accounts owned by others, like parents or partners, require signed gift letters or documentation proving it’s not a loan. If they can’t document it clearly, the lender might not count those funds at all. Keep your banking activity clean and minimal from the time you apply until after closing.

Trying to Get Cash Back at Closing Through Inflated Contracts

Some buyers think they’re being clever by negotiating a higher purchase price in exchange for seller-paid closing cost credits or post-sale kickbacks. Lenders see right through this. Extra credits aren’t cash back. They either lower your loan balance or disappear, and that can threaten the deal. This kind of arrangement inflates the loan-to-value ratio and violates lending rules. In slower markets, these tactics are more common, but they’re still risky. If a seller offers to cover costs, make sure it’s above board and disclosed properly in the purchase agreement. Don’t agree to inflated sale prices just to get money back. It’s not worth the risk.

REMAX agents understand how lenders assess risk and can flag mortgage mistakes before they become problems. From contract terms to closing coordination, we help you stay on track and offer expert mortgage approval tips so you don’t repeat common mortgage mistakes others have made.