Top 5 mistakes that can derail your mortgage application

You’ve found the house. You’re ready to apply for a mortgage. Everything seems to be moving forward — until your lender quickly needs additional documents, delays closing or tells you that something in your financial situation isn’t adding up. 

Situations like this are more common than many buyers expect. 

If you’re still early in your real estate journey, and especially if you’re a first-time homebuyer, start by making sure you understand mortgages and the steps to buying a house. This will give you the big picture of the whole homebuying process.  

If you’re about to apply for a mortgage and want a smooth mortgage application process, you’re in the right place. These are five of the most common mistakes our home loan experts see — and how to avoid them. 

Mistake 1: Making large purchases during the mortgage process 

Once you’ve decided to apply for a mortgage, it’s tempting to start preparing for your new home. Maybe you want to finance new furniture, purchase appliances or buy a vehicle before moving. 

But large purchases can quietly change one of the most important numbers lenders review: your debt-to-income ratio (DTI). 

Your DTI compares your total monthly debt payments to your gross monthly income. In many cases, lenders prefer this ratio to be 36% or less, meaning your monthly debt obligations take up no more than 36% of your income before taxes. 

If you’re already close to that threshold, financing a new purchase can push your DTI higher. That matters because lenders often run a final credit check shortly before closing to confirm your financial situation hasn’t changed since your loan was approved. 

If new debt shows up, it can lead to: 

• A lower approved loan amount 
• Changes to your mortgage interest rate 
• Delays in underwriting 
• In rare cases, the loan being reevaluated entirely 

Do this instead: The safest move is to hold off on major purchases until after your mortgage closes. 

Mistake 2: Moving large amounts of money without documentation 

During the application process, lenders carefully review your credit union or bank account statements to verify where your down payment and closing funds come from. 

Large deposits or frequent transfers between accounts can raise questions if the source of the money isn’t clear. 

If the source of funds isn’t clearly documented, underwriters may request additional documents or exclude certain funds when calculating your available assets. 

This is especially common when someone gives you money to help with a down payment. Lenders typically require a gift letter confirming that the funds do not need to be repaid. 

Do this instead: To keep things simple, try to avoid moving large amounts of money around in the months leading up to your mortgage application unless you can document the source. 

Mistake 3: Confusing prequalification with pre-approval 

Many borrowers begin the homebuying process with a mortgage prequalification, which is a quick estimate of how much you might be able to borrow. It’s usually based on basic financial information you provide, along with a credit score check. 

It is not the same as a mortgage pre-approval, which involves a much deeper review of your finances. Lenders verify documentation such as credit reports, pay stubs and account statements to confirm your income, debts and assets. Because the information is verified, a pre-approval provides a much clearer picture of what you can afford. 

Pre-approval offers outline the mortgage you’re likely to receive, including the estimated loan amount, interest rate and term. They are often valid for 30 to 90 days. 

Buyers who are only prequalified may run into challenges. If the original financial information provided wasn’t complete or accurate, buyers may later discover they qualify for less than expected — potentially putting the entire purchase at risk. 

Do this instead: Get pre-approved before you start seriously shopping for homes. It helps you understand your true budget, strengthens your offer, and helps you avoid the heartbreak of falling in love with a home you can’t afford. 

Mistake 4: Underestimating closing costs 

Many buyers focus on saving for a down payment, but closing costs can catch people by surprise. 

Closing costs typically range from 2-5% of the home’s purchase price and may include expenses such as: 

• Loan origination fees 
• Appraisal and inspection costs 
• Title insurance 
• Property taxes and homeowners insurance prepaid at closing 

Another common misconception is that buyers must put 20% down to qualify for a mortgage loan. While a larger down payment can help reduce monthly payments or eliminate private mortgage insurance (PMI), many loan programs allow significantly smaller down payments. 

The real mistake is putting every available dollar toward the down payment and leaving nothing for closing costs, moving expenses or early home repairs. 

Do this instead: Plan to save enough for both your down payment and your closing costs — and try to keep a small financial cushion after closing. 

Mistake 5: Changing jobs during the application process 

Employment stability plays an important role in mortgage approval. During the application process, lenders review your income history and verify your current employment. Many lenders also perform a final employment check shortly before closing to confirm that your financial situation hasn’t changed. 

If your job changes during that time — especially if your income structure changes — lenders may need to take another look at your loan. 

This can happen if you: 

• Switch employers 
• Move from salary to commission income 
• Become self-employed 
• Take unpaid leave 

When that happens, lenders may request additional documents, delay the underwriting process, or reassess your loan eligibility. 

Do this instead: If possible, wait until after your mortgage closes to make major career changes. Once the loan is finalized, you’ll have much more flexibility to make professional decisions without affecting your home purchase. 

Prepare your mortgage application documents early to reduce stress 

One of the biggest surprises for many borrowers is how much documentation lenders require during the application process. 

Mortgage lenders must verify your financial information before approving a home loan. 

Common documents lenders may request include: 

• Recent pay stubs 
• W-2 forms or tax returns 
• Credit unio or bank account statements 
• Credit reports 
• Identification documents 
• Details about existing debts 
• Documentation for large deposits 

Self-employed borrowers may also need to provide business tax returns or profit-and-loss statements. 

Having these records ready before you apply for a mortgage can help prevent delays and keep your loan application moving smoothly. 

Get guidance when applying for a mortgage 

Buying a home is one of the biggest financial decisions most people make, and the mortgage application process can feel complicated without the right guidance. 

Working with a knowledgeable lender can help you understand your loan estimate, compare interest rates and prepare the financial information needed for approval. An experienced loan officer can also help you avoid some of the common mistakes that slow down or derail applications. 

If you’re exploring home loans, Empeople offers a range of options designed to support different financial situations and homeownership goals. Empeople home loan experts can walk you through the process, explain your options and help you feel confident about each step. 

With the right preparation and support, applying for a mortgage can be a smooth step toward owning your next home.