Pre-Financing Pitfalls That Could Derail the Homebuying Process

There are a lot of things to consider when you choose a mortgage. Many buyers run into avoidable issues simply because they don’t know what to watch out for. To help you move forward with confidence, we cover a few common pitfalls — and how to sidestep them.

1. Overlooking the Real Cost of Homeownership

A mortgage payment is only one piece of your monthly financial puzzle. Before you start shopping for homes, take time to map out what your full budget will look like once you’re a homeowner.

·       Consider the 28% rule: According to some experts, your housing costs (mortgage principal, interest, taxes and insurance) should account for no more than 28% of your income.¹

·       Evaluate your budget: Add up everyday spending like groceries, transportation and utilities.

·       Take a look forward: Break down future obligations including childcare, retirement contributions or education savings.

·       Prep for emergencies: Keep a cushion for unexpected repairs.

2. Forgetting to Secure a Pre-Approval*

In a competitive market, a pre-approval letter can make your offer stand out. It signals to sellers that you’re financially prepared and serious about moving forward.

Pre-approval also gives you clarity by defining your price range upfront. To get one, you’ll typically provide financial documents and your lender will pull your credit. Many lenders offer a quick pre-approval process.

3. Assuming You Need a Huge Down Payment

A 20% down payment is not a requirement for homeownership. Plenty of loan programs allow qualified borrowers to put down less.

Options may include:

• FHA loans, which can allow down payments as low as 3.5%
• Programs like HomeReady® or Home Possible®, designed for low-to-moderate income buyers with minimum down payments as low as 3%**
• VA loans for eligible Active-Duty Military servicemembers, Veterans and some surviving spouses, which may allow for no down payment
• USDA loans for properties in qualifying rural areas, which can also offer zero-down financing

If saving a large lump sum feels impossible, these alternatives can make homeownership more accessible.

4. Initiating Major Financial Moves While Your Application Is Processed

Lenders want to see stability while your mortgage application is being evaluated. Sudden changes can raise red flags or delay approval.

Try to avoid:

• Switching jobs or altering your income structure without notifying your lender
• Opening new credit lines or financing large purchases
• Moving large sums of money between accounts without documentation
• Triggering new credit inquiries unless absolutely necessary

Shifts like these can affect your debt-to-income ratio or require additional verification, slowing things down.

5. Forgetting About Closing Costs

Some first-time buyers focus on the down payment and may overlook or underestimate the additional expenses due at closing. These fees typically range from 2–5% of the home’s purchase price and may include, but are not limited to:

• Appraisal and inspection fees
• Title services and insurance
• Origination charges
• Attorney fees (where applicable)
• Prepaid taxes and insurance

Because these costs vary by location, lender and loan type, it’s smart to plan for them early so they don’t catch you off guard.

6. Trying to Navigate the Process Alone

Mortgages can feel complicated, especially if it’s your first time buying a home. Working with a knowledgeable loan professional can help you understand your options, compare programs, and choose a loan that fits your financial goals.

A good mortgage expert will walk you through the process, answer questions, and help you avoid missteps that could cost you time or money.

Want to find a mortgage that works with your goals? Reach out to one of our mortgage experts.

References:

¹ What Is The 28/36 Rule For Home Affordability? | Bankrate

HomeReady® is a registered trademark of the Federal National Mortgage Association. Home Possible® is a registered trademark of the Federal Home Loan Mortgage Corporation.

*A pre-approval means we’ve reviewed your application, but all underwriting requirements may not be complete. Rates and terms can change, and eligibility depends on credit and property approval. Not all products are available in every state or for all loan amounts.

**Only available for owner occupied purchase and refinance transactions. Minimum 580 credit score. Income limits and property type restrictions apply. Subject to minimum and maximum loan amounts. Other terms and restrictions apply.