4 Dos and 4 Don'ts of Applying for a Mortgage

When you are applying for a home loan, you want to make the right choices during the application process. This means there are certain things you should try to do -- and certain things you should avoid.

To help you make the right moves, here are four dos and four don'ts when you're getting a mortgage.

Do this when applying for a mortgage

When you are applying for a home loan, be sure to check these four tasks off your to-do list.

1. Compare quotes: The terms of a mortgage loan can vary from one lender to another. Try to get quotes from multiple mortgage lenders of different types, including banks, credit unions, and online lenders. See how the total borrowing costs compare so you can find a loan that's affordable.
2. Understand the terms of any loan you're offered: Make sure you know if a mortgage loan is a fixed or adjustable-rate loan. Fixed rate loans have the same interest rate and monthly payment for the life of the loan while the rate and payment can change for an adjustable-rate loan. You should also find out what fees you'll owe upfront, and whether you have to pay points, which buy down your interest rate.
3. Take other housing costs into account: You'll want to make sure your housing costs are affordable. This includes not just your mortgage, but also your property taxes and insurance as well. Aim to keep all of your housing costs, including your home loan and other expenses, to 25% of your income or less.
4. Make sure you're as well-qualified as possible: The higher your credit score and the lower your debt, the more favorable the loan terms you'll be offered. So try to make sure you make payments on time to earn a good credit score and pay down as much debt as possible before you apply.

Don't do this when applying for a mortgage

There are also some things you should try to avoid when applying for a mortgage so you don't jeopardize your ability to get an affordable home loan. Here are four don'ts.

1. Change jobs: Lenders want to see proof of stable income. If you change jobs shortly before applying for a mortgage or during the process of getting a loan, this can jeopardize your loan approval.
2. Take on new debt: Borrowing more money in the time leading up to getting a mortgage can make it more difficult to qualify. Your new debt could be a red flag to lenders you're borrowing too much, or it could cause your total monthly payments to exceed the allowable amount (most lenders want total debt costs to be below 36% of income, and that includes your new mortgage loan).
3. Stretch to borrow as much as you can: Don't try to borrow the maximum possible amount or stretch your budget to afford a home loan that's really out of your price range. Doing so could cause you to be unable to accomplish other goals, like putting enough money into savings or into your brokerage account. Consider how much you're comfortable spending on housing by looking at your budget, and let that guide you in deciding how much to borrow, rather than just taking out the full loan amount the bank allows.
4. Choose the first lender you get a quote from: Finally, don't just borrow from the first lender that gives you a quote -- even if you have other banking relationships with that lender. You owe it to yourself to see what all different loan providers have to offer for what will likely be your largest debt.

By making sure to stick with these dos and don'ts, you should end up with a mortgage that works well for you to help you buy a home.