The Top 5 Mortgage Mistakes to Avoid
Buying a home can be an exciting and rewarding experience, but it can also be a daunting and overwhelming process, especially for first-time homebuyers.
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Mortgages are a significant financial commitment, and making mistakes during the process can have serious consequences. In this blog post, we'll explore the top 5 mortgage mistakes to avoid.
1. Failing to Check and Improve Your
Credit Score
Your credit score plays a significant role in determining your eligibility for a mortgage and the interest rate you'll receive. Many first-time homebuyers make the mistake of failing to check their credit score or not taking steps to improve it before applying for a mortgage.
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To avoid this mistake, check your credit score and take steps to improve it if necessary. This may include paying off outstanding debts, making on-time payments, and disputing any errors on your credit report. A higher credit score can lead to a lower interest rate and a more favorable mortgage offer.
2. Ignoring
Closing Costs
Another common mistake is ignoring closing costs. Many first-time homebuyers are unaware of the various fees associated with closing a mortgage, such as attorney fees, title search fees, and appraisal fees. These costs can add up quickly and significantly impact the total cost of the mortgage.
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To avoid this mistake, research the average closing costs in your area and budget accordingly. Be sure to factor in these costs when considering the overall cost of the home.
2. Ignoring Closing Costs
Another common mistake is ignoring closing costs. Many first-time homebuyers are unaware of the various fees associated with closing a mortgage, such as attorney fees, title search fees, and appraisal fees. These costs can add up quickly and significantly impact the total cost of the mortgage.
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To avoid this mistake, research the average closing costs in your area and budget accordingly. Be sure to factor in these costs when considering the overall cost of the home.
3. Not Getting Pre-Approved
Getting pre-approved for a mortgage is an essential step in the home buying process. Pre-approval gives you a clear idea of how much you can afford to spend on a home and helps you avoid the disappointment of falling in love with a home you can't afford.
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To avoid this mistake, get pre-approved for a mortgage before you start shopping for a home. This will help you narrow down your search to homes that are within your budget and prevent you from wasting time on homes that are out of reach.
4. Taking on Too Much Debt
Taking on too much debt before or during the mortgage process can have serious consequences. Lenders look at your debt-to-income ratio when determining your eligibility for a mortgage. If you have too much debt, you may not qualify for a mortgage or may be offered a higher interest rate.
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To avoid this mistake, avoid taking on new debt before or during the mortgage process. This includes opening new credit cards, taking out a car loan, or making large purchases on existing credit cards.
4. Taking on Too
Much Debt
Taking on too much debt before or during the mortgage process can have serious consequences. Lenders look at your debt-to-income ratio when determining your eligibility for a mortgage. If you have too much debt, you may not qualify for a mortgage or may be offered a higher interest rate.
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To avoid this mistake, avoid taking on new debt before or during the mortgage process. This includes opening new credit cards, taking out a car loan, or making large purchases on existing credit cards.
5. Choosing the Wrong Mortgage
Choosing the wrong mortgage can be a costly mistake. There are various types of mortgages available, and each has its pros and cons. Choosing the wrong mortgage can lead to higher interest rates, higher monthly payments, and a more significant financial burden in the long run.
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To avoid this mistake, research the different types of mortgages available and choose the one that best fits your financial situation and goals. Don't be afraid to ask your lender questions and seek advice from a financial advisor.
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💰 Bank Statement Loans Explained: Who Qualifies & Who Doesn’t in 2026 🚀
💰 Bank Statement Loans Explained: Who Qualifies & Who Doesn’t in 2026 🚀
📘 Self-Employed Borrowers: The Truth About Bank Statement Mortgage Loans 💼
💰 The Truth About Bank Statement Loans: Who Qualifies & Who Doesn’t
For business owners, freelancers, and 1099 earners, qualifying for a mortgage shouldn't feel like trying to fit into a box that was built for W-2 employees. That’s exactly why bank statement loans exist — and why they’ve become one of the most powerful financing tools in the 2026 lending market.
At Medallion Funds, we see this every day: strong borrowers with real income, real assets, and real businesses get declined by retail banks simply because tax returns don't reflect their true cash flow. Bank statement loans flip that script.
This guide breaks down who qualifies, who doesn’t, and what lenders are really looking for in today’s market.
✅ What Is a Bank Statement Loan?
A bank statement loan is a mortgage that uses 12 or 24 months of business or personal bank statements to calculate income instead of tax returns.
Lenders analyze actual deposits to determine qualifying income — a huge advantage for borrowers who reinvest heavily or deduct expenses aggressively.
✅ Who Qualifies for a Bank Statement Loan?
✔ Self-Employed Borrowers (2+ Years in Business)
This group includes:
• Business owners
• Independent contractors
• Gig workers
• Realtors, loan officers, consultants, contractors
• Investors with 1099 income streams
Lenders want to see:
• Consistent monthly deposits
• Stable or rising income trends
• Clean account history (no big NSF issues)
✔ Borrowers With Strong Cash Flow but Low Taxable Income
If your tax returns show very little income because of write-offs, depreciation, or reinvestment — you’re a textbook bank-statement borrower.
✔ Borrowers With Solid Credit (Typically 620–680 Minimum)
Higher scores = better pricing.
700+ = ideal for top-tier programs.
✔ Borrowers With Reasonable Reserves
Most lenders want 3–12 months of reserves, depending on loan size and risk profile.
❌ Who Doesn’t Qualify for a Bank Statement Loan?
✘ Borrowers Without Self-Employed or 1099 Income
If your main income is W-2, lenders must use W-2 documentation.
✘ Businesses With Highly Irregular or Declining Deposits
A few inconsistent months are fine — a long downward trend is not.
✘ Borrowers With Significant Overdraft or NSF Activity
Overdrafts tell lenders the borrower is living too close to the edge.
✘ New Businesses (Under 12 Months)
Some niche lenders allow 1 year in business, but 2 years is the industry norm.
🔍 How Lenders Calculate Income (The Real Formula)
Banks analyze:
1. Gross monthly deposits
2. Expense factor (typical 40–60% unless CPA letter provided)
3. Net qualifying income after applying the expense factor
Example:
Deposits: $30,000/month
Expense factor: 50%
Qualifying income: $15,000/month
This can dramatically improve purchasing power compared to tax-return income.
🏡 Why Bank Statement Loans Are Exploding in 2026
• Massive rise in self-employment
• Growth of gig-economy income
• Small-business expansion in Texas and nationwide
• Banks tightening traditional guidelines
• Investors needing flexible income documentation
For the right borrower, this loan isn’t a backup plan — it's a competitive advantage.
🧭 Final Takeaway: Who Should Use Bank Statement Loans?
Bank statement loans make the most sense for:
✔ Self-employed high earners
✔ Business owners reinvesting profits
✔ Borrowers who want more buying power
✔ Borrowers who need speed and flexibility
And they’re not ideal for:
✘ Borrowers with unstable finances
✘ Those dependent on W-2 income
✘ New businesses with limited history
If you're self-employed and want to buy or refinance in 2026, this is one of the best tools in the market — and Medallion Funds can connect you to the right lender.
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© 2023-2024 Bill Rapp, Medallion Funds LLC, Director of Capital Advisory
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Refinancing youe loan and when to do it
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Copyright ©2021 | Mortgage Viking Team
Licensed to Do Business | NMLS # 228246
This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Copyright © 2021 | Medallion Funds
Corporate | NMLS ID NMLS # 1825831
Corporate Address : 2651 N. Green Valley Pkwy STE. 101 Henderson, NV 89014
Corporate NMLS NMLS # 1825831 | Company Website: https://medallionfunds.com/bill-rapp/
Copyright ©2021 | Mortgage Viking Team Licensed to Do Business | NMLS # 228246
This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply
Corporate | NMLS ID NMLS # 1825831
Corporate Address : 2651 N. Green Valley Pkwy STE. 101 Henderson, NV 89014 https://medallionfunds.com/bill-rapp/