4 Moves That Make Getting a Mortgage Harder

Don't jeopardize your homeownership dreams by making these financial moves.

Getting approved for an affordable mortgage is crucial to achieving your homeownership dreams. After all, most people can't pay cash for a home; houses are simply too expensive.

You'll need to find a lender willing to give you a loan at a reasonable mortgage rate, so you'll want to avoid certain financial moves that could jeopardize your eligibility to borrow. In particular, here are four things you may not want to do if you're going to be applying for a mortgage some time soon.

1. Switching jobs

Mortgage lenders like to see that you have had a consistent paycheck from the same employer. That helps make them more confident that you will keep your job over the long term and that you will be able to continue making monthly mortgage payments after they give you a loan.

If you change jobs shortly before you apply for a mortgage, this could affect your ability to borrow. Typically, you need two years of employment history with the same company at your current salary in order to get full credit for your income when lenders decide how much they are willing to loan you for your home purchase.

2. Forgetting to pay a bill

If you make late payments on your credit cards or other debt, your lender will typically report the delinquency to the major credit reporting agencies. A late payment can reduce your credit score and make mortgage lenders very nervous about your ability to be responsible with paying your home loan.

You definitely don't want to pay late in the time leading up to your home purchase. If you inadvertently make a mistake and miss a payment, contact your creditor right away and see if it might be willing to remove the negative record from your credit history. If you've been a good customer, your creditor may be willing to do this for you.

3. Opening a new credit card

Opening new credit could affect your ability to get a loan as well. Your lender will find out about the new card because you will get a hard credit inquiry on your credit record and because the new account will show up on your credit report.

The inquiry and new account could hurt your credit score, as well as make your mortgage lender nervous that you are taking on too many financial obligations at once. Wait to take on any new debt if you are thinking about getting a mortgage within the next year or so. That will help you avoid red flags that limit your borrowing options.

4. Charging too much on your existing cards

Spending too much on your current credit cards can both lower your credit score and make mortgage lenders nervous that you won't be able to cover all of the payments that are due. Both your credit score and the amount of debt you have relative to your income (known as your debt-to-income ratio) are key determining factors in mortgage loan approval, and both will be affected by charging a lot.

You can avoid this by simply keeping your credit card balance low. If you do that and you avoid taking on new loans, make your payments on time, and provide stable proof of income, you should be well on your way to getting approved for a home loan at a competitive rate.