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Affinity Title

MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
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  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
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image

CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

  1. Home
  2. Mortgage Knowledge Center
  3. Top 10 Mistakes to Avoid When Applying for a Mortgage

MORTGAGE

Top 10 Mistakes to Avoid When Applying for a Mortgage

EXPECTED READ TIME: 4 MINUTES

July 16, 2021

Whether you're an HGTV fan or you've been talking to friends and family about the benefits of homeownership, you may be gearing up for a home search of your own. Along with that, of course, will come a mortgage application process, as well. You may have already checked your credit report and set aside some money for the earnest money deposit and down payment. Mission accomplished, right? Well, not so fast.

While you may be ahead of the game right now, there are still some errors that can sidetrack your home buying goals and make mortgage approval more difficult. Check out our list of mistakes to avoid when applying for a mortgage so that you don't fumble the ball in the red zone.

1. Plundering Your Savings

You may have calculated your potential down payment to the penny, and now you want to put some of your savings toward other fun bells and whistles for your new home. However, you'll still need to pay for closing costs, a home inspection, and a variety of other items during the purchase process. Make sure you've saved more than you think you'll need, just in case.

2. Running Up Credit Cards

Here too, you may be thinking about buying a house full of furniture or a top-notch home electronics system, but you'll need to resist the temptation. Plunging into debt at this point could jeopardize your mortgage approval by changing your credit score or debt to income ratio.

3. Buying That New Car

Many buyers use the opportunity of purchasing a new home as a chance to buy a new car to park in the driveway. However, this too can change your debt burden and undermine your chances of loan approval. Even if you're approved, carrying more debt can keep you from qualifying for the best interest rates on your mortgage.

4. Quitting Your Job

Perhaps you've been thinking about moving to a new company or staying home with the kids. While that may make sense for your career, it's a bad idea to do so — right before you apply for your mortgage. That's because one of the factors your lender will consider is your employment history and income, and both will need to be solid when you apply.

5. Starting a Business

If you're dreaming of entrepreneurship, you may want to put your startup goals on hold until after you've purchased your home. It will be much easier to earn approval based on the income from your current job. Alternatively, you may want to wait until your business is well-established and you can show a solid history of earnings.

6. Failing to Keep Good Records

You'll need to provide a variety of financial records to your lender, including tax records, investment records, bank statements, employment verification, and more. In addition, if you've used gift funds for part of your down payment, you'll need letters from the givers. Start early organizing your records so that you can provide them quickly when requested.

7. Buying More House Than You Can Afford

It's easy to get swept up by the excitement of real-life house hunting and end up with a mile-long wish list and a house that costs too much. Talk to your lender and your real estate professional early in the process and put together a budget that makes sense, both for your income and for your lifestyle.

8. Buying Because "Everybody Else" is Buying

It's important to understand what goes into homeownership and to make an informed decision before you buy. Take a look at your budget, lifestyle, and plans for the future to determine whether a real estate purchase makes sense for you right now. Remember, just because your friends are buying or you're in the middle of a hot market doesn't mean that this is the right time and the right commitment for you.

9. Buying With the Wrong Person

Remember that when you purchase a home with a friend, family member, or significant other, your interest rate and approval amount are based on the financial history you share. That can mean that you could end up paying a higher interest rate because of their bad credit rating. Make sure that your co-buyer is trustworthy, fiscally responsible, and truly ready for homeownership.

10. Failing to Compare Loan Products

There are a variety of different types of loans with varying terms and down payment requirements. It's important for you to understand all of the different mortgage options available to you so that you can make the right financial decisions — both long-term and short-term.

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

Get Started

SIMILAR ARTICLES

Conventional Loan Down Payment

How much down payment do you need for a conventional loan? Get the answer to that and learn more about conventional loans.
down payment money

Benefits of an FHA Mortgage

FHA loan benefits include low down payments, great interest rates, easier credit rules, and financing for 1-4 units. Read on to see if an FHA is for you.
couple moving into home with fha loan

4 Credit Mistakes to Avoid When Buying a Home

Discover how to prepare your credit score for homebuying, plus the biggest credit mistakes to avoid.
checking credit score

Basics of Self-Employed Mortgage Loans

Getting a mortgage when you're self-employed can be challenging. Read on to find out what documentation you'll need and how to be successful.
woman who is self-employed
image

CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Disclosures

1Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

*Prime Rate is % as of . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes.

  • Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
  • Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Draw Period. During your Draw Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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This credit union is federally insured by the National Credit Union Administration. Rates are current as of October 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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Routing #256078446

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IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website that is not a part of Pentagon Federal Credit Union.


The content you are about to view is produced by a third party unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Realty, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Realty, LLC, see the Affiliate Business Arrangement Disclosure.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website.


The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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