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Securing a mortgage is a significant financial commitment, and even minor missteps can derail the process. 

When applying for a home loan, lenders scrutinize every aspect of your financial profile to assess your creditworthiness. Avoiding these common financial mistakes can increase your chances of a smooth and successful mortgage application.

Moving Money Around

Lenders typically request bank statements to verify the source of your down payment and cash reserves. Unexplained large deposits or transfers can raise red flags and prompt additional documentation requests. Avoid moving significant sums between accounts in the months leading up to your mortgage application, as this can complicate the approval process.

Filing for a Leave of Absence

Employment stability is a crucial factor in mortgage underwriting. If you plan to take an extended leave of absence from work, whether paid or unpaid, it's best to wait until after closing on your mortgage. Lenders may view a leave of absence as a potential threat to your ability to make timely mortgage payments, leading to a possible denial or delay in approval.

Applying for a New Credit Card

While building credit history is important, opening new credit accounts just before applying for a mortgage can negatively impact your credit score. Each credit application results in a hard inquiry on your credit report, which can temporarily lower your score. Additionally, new accounts with no payment history may be perceived as a higher risk by lenders.

Applying for an Increase in Credit Limit

Similar to applying for new credit, requesting a higher credit limit on existing accounts can also trigger a hard inquiry and potentially lower your credit score. Lenders prefer to see a stable credit profile with no recent changes, so it's best to avoid any credit limit increases until after your mortgage has been approved and closed.

Changing Jobs

Lenders look for employment stability when evaluating mortgage applications. While changing jobs is not necessarily a deal-breaker, it can complicate the approval process. If you must change jobs during the mortgage application process, be prepared to provide documentation supporting your new income, such as an employment contract or pay stubs. Remaining in the same industry and maintaining a consistent income level can help mitigate any potential concerns.

By avoiding these financial mistakes, you can present a more favorable financial profile to lenders and increase your chances of a smooth and successful mortgage approval process. Remember, open communication with your lender and transparency about any significant changes in your financial situation can go a long way in facilitating a positive outcome.

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