You’ve found the perfect house. The kitchen is modern, the backyard is ready for summer barbecues, and the neighborhood is exactly where you want to be. You’re ready to sign the papers and start packing. But then, your mortgage application hits a snag. Your credit score isn’t quite where it needs to be, or a recent financial move has triggered a "red flag" for the lender.
At Maya Team Inc., we see this happen more often than you’d think. Even the most responsible people can make small credit mistakes that have a huge impact on their ability to get a home loan. The good news? Most of these issues are preventable if you know what to look for.
If you’re planning to buy a home in the next six to twelve months, now is the time to audit your credit habits. Here are the seven most common mistakes we see and exactly how you can fix them before you start your home search.
1. Waiting Until the Last Minute to Check Your Report
The biggest mistake is the "wait and see" approach. Many buyers don’t look at their credit until they are sitting in front of a Mortgage Loan Originator (MLO). By then, if there’s an error, it might be too late to fix it before your dream home gets snapped up by another buyer.
The Fix: Pull your credit reports from all three major bureaus (Equifax, Experian, and TransUnion) at least six months before you plan to buy. Look for accounts you don't recognize, incorrect balances, or late payments that you know were paid on time. Errors can take sixty to ninety days to dispute and correct. Starting early gives you the runway you need to enter the market with your strongest possible score.
2. Thinking a "Small" Late Payment Won't Matter
Life gets busy, and sometimes a utility bill or a minor credit card payment slips through the cracks. While a five dollar late fee might not seem like a big deal, the impact on your credit score can be massive. For mortgage lenders, your payment history is the single most important factor.
The Fix: Consistency is king. Set up automatic payments for at least the minimum amount on every single account you own. Even one thirty-day late payment in the twelve months leading up to your home purchase can significantly drop your score or even disqualify you from certain programs like the CalHFA MyHome assistance program.
3. Opening New Credit Lines During the Process
We’ve seen it happen: a buyer gets pre-approved and then goes out to buy a new car or finances five thousand dollars worth of new furniture for the house they haven't closed on yet. This is a major "no-no."
Why it’s a problem:
- Credit Inquiries: Every time you apply for credit, your score takes a small hit.
- Debt-to-Income (DTI): A new monthly payment (like a car loan) increases your DTI ratio. If your DTI gets too high, you may no longer qualify for the mortgage amount you were originally promised.
The Fix: Freeze your spending. Do not open new credit cards, do not co-sign for anyone else, and do not buy anything on credit until the keys to your new home are in your hand.
4. Closing Old Credit Card Accounts
It seems logical: you want to "clean up" your finances, so you close those old credit cards you haven't used in years. Unfortunately, this can actually hurt your score. A large part of your credit score is based on the "age" of your credit history and your "utilization ratio."
The Fix: Keep those old accounts open, even if the balance is zero. Closing them shortens your average credit age and reduces your total available credit, which can make your utilization look higher than it actually is.
5. Maxing Out Your Credit Limits
Even if you pay your bills on time every month, if your credit card balances are close to their limits, your score will suffer. Lenders look for a "utilization ratio" of thirty percent or less. For example, if you have a credit limit of one thousand dollars, you should try to keep your balance below three hundred dollars.
The Fix: Aim to pay down your balances as much as possible before the lender pulls your credit. If you have extra savings, using a few hundred dollars to lower a revolving balance can sometimes jump your score by twenty or thirty points in a single month.
6. Disputing Accounts While Underwriting
If you find an error on your credit report after you’ve started the mortgage process, your first instinct might be to file a dispute. However, many mortgage systems will "kick out" an application if there is an active dispute on a significant account. The lender needs to see a finalized score, and a dispute puts that score into a state of flux.
The Fix: Talk to your Mortgage Loan Originator (MLO) before you dispute anything. We can often use a process called a "Rapid Rescore" to fix legitimate errors in just a few days without derailing your entire loan application.
7. Large, Unexplained Cash Deposits
This isn't strictly a "credit score" issue, but it is a major credit profile issue. Lenders are required by law to "source" the money you are using for your down payment. If you suddenly deposit three thousand dollars in cash that can't be traced to a paycheck or a documented gift, it can cause the lender to pause your approval.
The Fix: Keep your money where it is. If you are receiving a gift from a family member, make sure you have a signed "Gift Letter" and a clear paper trail of the transfer. Avoid moving large sums between accounts in the sixty days before you apply for your loan.
How to Get "Mortgage Ready" Today
Improving your credit doesn't happen overnight, but with the right guidance, it’s entirely possible. Here is a quick checklist to keep you on track:
- Check your score: Get a copy of your report today.
- Automate everything: Ensure no payment is ever late.
- Pay down debt: Focus on credit cards with the highest utilization.
- Document everything: Keep your pay stubs, bank statements, and tax returns organized.
- Consult a professional: Don't guess. A quick conversation with an expert can save you thousands of dollars in interest.
At Maya Team Inc., we specialize in helping first-time homebuyers navigate the complex world of credit and mortgages. Whether you are looking for an FHA loan with a low down payment or you want to see if you qualify for zero down payment assistance, Rony Velasquez and Mona Bottros are here to guide you every step of the way.
Ready to see where you stand?
We would love to help you create a roadmap to homeownership. Write a comment if you find this useful or if you have a specific question about your credit situation!
Contact Maya Team Inc. today:
- Mobile: 562-762-9634 (Ask for Rony Velasquez)
- Email: mayateaminc@gmail.com
- Website: https://nas.io/mayateaminc
Rony Velasquez
Real Estate and Mortgage Broker | Realtor® | Mortgage Loan Originator (MLO)
Mona Bottros
Realtor® and Office Manager
