Getting a mortgage is likely the largest financial transaction of your life, and mistakes during the process can cost you tens of thousands of dollars — or even derail your home purchase entirely. After helping hundreds of borrowers through the mortgage process at Theós Financial, we have seen the same costly errors come up again and again. Here are the seven most common mortgage mistakes and exactly how to avoid each one.
Mistake #1: Not Shopping Your Interest Rate
This is arguably the most expensive mistake a borrower can make, and unfortunately it is also the most common. According to the Consumer Financial Protection Bureau, borrowers who get just one additional rate quote save an average of $1,500 over the life of their loan — and those who get five quotes save significantly more.
Many buyers go to their existing bank or credit union, accept whatever rate they are offered, and never look at alternatives. They assume rates are the same everywhere, or they do not want the hassle of multiple applications. This is leaving money on the table.
The solution is simple: work with a mortgage broker who shops your loan across dozens or even hundreds of lenders on your behalf. At Theós Financial, we compare rates from over 200 wholesale lenders to ensure you are getting the most competitive pricing available. The rate difference between the best and worst offers can be 0.5% or more — on a $500,000 loan, that translates to over $50,000 in interest over 30 years.
Mistake #2: Skipping the Pre-Approval
Some buyers start house-hunting before getting pre-approved for a mortgage, relying on online calculators or rough estimates to determine their budget. This creates two serious problems.
First, you might be looking at homes outside your price range, wasting time and setting yourself up for disappointment. Or worse, you might be underestimating what you can afford and missing out on better options. Second, in competitive markets, sellers and their agents simply will not take you seriously without a pre-approval letter. Your offer may not even be considered.
A full pre-approval involves a lender reviewing your complete financial picture — income, assets, debts, and credit history — and issuing a letter stating exactly how much they will lend you. This gives you confidence in your budget and credibility with sellers. The process takes as little as a day with the right lender, so there is no reason to skip it.
Mistake #3: Changing Jobs During the Process
Lenders verify your employment at multiple points during the mortgage process — at application, during underwriting, and often again just before closing. Changing jobs during this critical period can create significant complications, even if the new job pays more.
If you switch from a salaried position to a commission-based role, the lender may not count the commission income until you have a track record. Moving from W-2 employment to self-employment is even more problematic — most lenders require two years of self-employment income history. Even a lateral move to a similar job at a different company can raise questions and cause delays.
The best practice is to stay in your current position until after closing. If a job change is unavoidable, notify your loan officer immediately — before making the switch. We can advise you on how the change might affect your application and explore options to keep your loan on track.
Mistake #4: Making Large Purchases Before Closing
This mistake has killed more deals than most people realize. You are pre-approved, you find the perfect home, your offer is accepted, and you are excited. So you go out and buy furniture for the new house, finance a new car because you will need it for the longer commute, or put a big vacation on your credit card to celebrate.
Every one of these actions can disqualify you from your mortgage. Large purchases increase your debt-to-income ratio, new credit inquiries can temporarily lower your credit score, and new credit accounts raise red flags with underwriters. Even shifting large amounts of money between bank accounts can trigger issues, because lenders need to document the source of all funds.
The rule is straightforward: from the moment you start the mortgage process until the day you close, make no major financial changes. Do not open new credit cards, do not finance anything, do not make large cash deposits without documentation, and do not co-sign for anyone else's loan. If in doubt, ask your loan officer before doing anything.
Mistake #5: Ignoring Closing Costs
Many first-time buyers focus exclusively on the down payment and are blindsided by closing costs. These additional expenses typically range from 2-5% of the loan amount and include lender origination fees, appraisal fees, title insurance, escrow fees, prepaid property taxes, prepaid homeowners insurance, and recording fees.
On a $500,000 loan, closing costs can range from $10,000 to $25,000. If you are planning for a 5% down payment of $25,000 but have not budgeted for closing costs, you could be $10,000-$25,000 short at the closing table.
Here is how to avoid this mistake: ask for a Loan Estimate from your lender early in the process. This standardized document details all expected closing costs. Compare Loan Estimates from multiple lenders — not just the interest rate — to get the full picture. Also explore options to reduce out-of-pocket costs: seller concessions, lender credits (accepting a slightly higher rate in exchange for the lender covering some closing costs), and gift funds from family members.
Mistake #6: Not Reading Your Loan Documents
The mortgage closing involves signing a stack of documents, and many borrowers simply sign where they are told without reading or understanding what they are agreeing to. This can lead to unpleasant surprises down the road — prepayment penalties they did not know about, adjustable rate terms they did not fully understand, or escrow requirements they were not expecting.
Under federal law, you must receive your Closing Disclosure at least three business days before your closing date. Use this time. Review every line. Compare it to your original Loan Estimate and flag any discrepancies. Ask your loan officer to explain anything you do not understand. Review our documents checklist to familiarize yourself with what to expect.
Key items to check: your interest rate and whether it is fixed or adjustable, the monthly payment amount, the loan term, whether there is a prepayment penalty, the escrow requirements, and all closing costs. If something does not match what you were promised, speak up before you sign.
Mistake #7: Choosing the Wrong Loan Type
Not all mortgages are created equal, and the wrong loan type can cost you thousands. A buyer who qualifies for a VA loan but takes a conventional loan is paying unnecessary mortgage insurance and potentially a higher down payment. A buyer who puts 5% down on a conventional loan might save money with an FHA loan — or vice versa, depending on their credit score and the specific pricing.
Here is a quick overview of when each loan type typically makes sense:
Conventional loans are best for borrowers with good credit (700+), at least 5% down, and stable income. They offer the most flexibility and the best rates for qualified borrowers.
FHA loans are ideal for first-time buyers with lower credit scores (580-699) or limited down payment funds (3.5% minimum). The trade-off is mandatory mortgage insurance for the life of the loan.
VA loans are the best option for eligible veterans and active-duty military — zero down payment, no monthly mortgage insurance, and competitive rates. If you qualify, it is almost always the best choice.
Jumbo loans are necessary for loan amounts above the conforming limit ($766,550 in most areas for 2026). They typically require stronger credit and larger down payments but offer competitive rates for well-qualified borrowers.
Working with a knowledgeable mortgage broker ensures you are matched with the right loan type for your specific situation. At Theós Financial, we analyze every option before making a recommendation.
The Bottom Line
Every one of these mistakes is avoidable with the right guidance and preparation. The common thread is simple: work with an experienced, independent mortgage professional who has your best interests at heart, and communicate openly throughout the process.
At Theós Financial, we guide our clients through every step of the mortgage process, proactively identifying potential issues before they become problems. Our technology makes the process faster, our lender network ensures you get the best rate, and our personal approach means you always have someone to call when questions come up.
Ready to get started the right way? Get your personalized rate quote in under 60 seconds, or call us at 661-812-3950.