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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š How to Build a Real Estate Portfolio Without Tax Returns š
š How to Build a Real Estate Portfolio Without Tax Returns š
š No Tax Returns? How Investors Are Still Building Real Estate Portfolios š§¾ā
How to Build a Real Estate Portfolio Without Tax Returns
For many real estate investors, tax returns are not a reliable reflection of true income. Aggressive write-offs, depreciation, and legitimate tax strategies often reduce taxable income on paperāmaking it difficult to qualify for traditional mortgages. The good news is this: you can still build a real estate portfolio without tax returns if you understand how alternative lending works.
As a mortgage broker, my role is to structure financing around cash flow, assets, and deal fundamentalsānot just W-2s and tax transcripts.
Why Traditional Loans Fall Short for Investors
Conventional lenders rely heavily on:
Ā·Two years of tax returns
Ā·Adjusted gross income
Ā·Debt-to-income ratios
For self-employed borrowers and investors, this often creates unnecessary friction. Fortunately, portfolio and non-QM lenders underwrite deals differently.
Key Loan Options That Do NOT Require Tax Returns
1. DSCR Loans (Debt Service Coverage Ratio)
DSCR loans qualify borrowers based on the propertyās incomeānot personal income. If rental cash flow covers the mortgage payment, tax returns are typically not required.
Best for:
Ā·1ā4 unit investment properties
Ā·Long-term rental portfolios
Ā·Investors scaling multiple properties
2. Bank Statement Loans
Instead of tax returns, lenders review 12ā24 months of personal or business bank statements to calculate income.
Best for:
Ā·Self-employed borrowers
Ā·Business owners
Ā·Contractors and gig workers
3. Asset-Based Lending
Qualification is driven by liquid assets, reserves, and overall net worth rather than income documentation.
Best for:
Ā·High-net-worth investors
Ā·Retirees
Ā·Investors repositioning capital
4. Portfolio & Private Lenders
These lenders keep loans in-house and can customize underwriting guidelines around the deal itself.
Best for:
Ā·Unique properties
Ā·Mixed-use assets
Ā·Investors with complex income
How to Strategically Build a Portfolio Without Tax Returns
Ā·Focus on cash-flow-positive properties
Ā·Keep clean operating statements and leases
Ā·Maintain strong reserves
Ā·Work with a broker who understands investor underwriting
Ā·Use DSCR loans to scale instead of re-qualifying personally every time
Why Working With a Mortgage Broker Matters
Banks sell products. Brokers design strategies.
As a broker, I match your investment goals with the right capital sourceāwhether thatās DSCR, bank statement, or asset-based lendingāso your tax strategy doesnāt limit your growth strategy.
Final Thought
Not having tax returns does not disqualify you from building wealth through real estate. It simply means you need smarter loan structures, better lenders, and an advisor who understands investor finance.
If you want to scale your portfolio without traditional income documentation, this is exactly what I help investors do every day.
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Ā© 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 Ā©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 Ā© 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 Ā©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/