First-Time Home Buyer Mistakes to Avoid

1. DON'T Change Jobs or Income Sources

This is the #1 mortgage killer. Even if it's a promotion or higher-paying job, switching employers during the loan process raises red flags for lenders. They've qualified you based on your current employment stability and income verification.

• Your lender must re-verify employment, which can delay closing
• If you're in a probationary period at your new job, you may no longer qualify
• Commission-based or self-employment income requires 2+ years of history
• Your loan could be denied entirely, causing you to lose your earnest money

Bottom line: Wait until after closing to make any employment changes.

2. DON'T Make Large Purchases or Open New Credit

It's tempting to start buying furniture, appliances, or that new truck for your Wisconsin property. Don't do it. Any new debt changes your debt-to-income ratio — the key metric lenders use to approve your loan.

• Financing furniture, appliances, or electronics
• Buying a new car or taking out an auto loan
• Opening new credit cards (even store cards with "0% financing")
• Co-signing on loans for anyone else
• Taking out personal loans

Even if you don't use the credit, just opening the account can impact your approval.

3. DON'T Deposit Large Amounts of Cash

Lenders must verify and document the source of all funds used for your down payment and closing costs. Large, unexplained cash deposits are a major red flag and can halt your closing.

• Lenders will require a paper trail for any large deposit
• If you can't document it, those funds may be excluded from your available cash
• This could leave you short for closing costs

If you receive gift money from family: get a signed gift letter from the donor and maintain clear documentation of the transfer. Never deposit cash — use traceable methods like checks or wire transfers.

4. DON'T Close Credit Card Accounts

You might think closing old credit cards will help your mortgage application — it won't. It can actually hurt you by reducing your available credit and increasing your credit utilization ratio, which can lower your credit score. Keep your accounts open and active. Just don't use them or make large charges during the loan process.

5. DON'T Miss Any Payments

Keep ALL your accounts current. A single late payment on your credit report during the loan process can derail your approval. Set up automatic payments if needed to ensure nothing slips through the cracks.

• Credit cards
• Auto loans
• Student loans
• Rent or current mortgage
• Utilities and recurring bills

6. DON'T Move Money Between Accounts Without Documentation

Lenders will review your most recent bank statements and will question any unusual activity. Moving money around between accounts — even your own — creates confusion and requires additional documentation.

Best practice: Keep your down payment funds in one stable account and avoid transferring money unnecessarily. If you must move funds, keep detailed records and be prepared to explain the transaction.

7. DON'T Ignore Your Lender's Requests

When your lender asks for documentation — bank statements, pay stubs, tax returns, explanations — respond quickly. Delays in providing paperwork are one of the most common reasons closings get postponed. The faster you provide requested documents, the smoother your path to closing.

8. Plan Ahead If Using Retirement Funds for Your Down Payment

Many first-time buyers plan to use their 401(k) or IRA for down payment funds. While this is allowed, it requires careful timing and planning — wait until the last minute and you could delay your closing or even lose the deal.

• Processing time can take 2–4 weeks or longer to receive funds
• Lenders need to verify the source and may require documentation from your plan administrator
• Some lenders require funds to be "seasoned" (sitting in your account) for 60 days before closing
• First-time homebuyer exemptions allow penalty-free withdrawals up to $10,000 from IRAs, but you'll still owe income tax
• 401(k) loans or hardship withdrawals have their own requirements and timelines

Start this process early — ideally before you even start house hunting. Talk to your lender about their specific seasoning requirements and give yourself plenty of buffer time.

The Golden Rule: When in Doubt, Ask First

The period between contract and closing isn't the time to make financial moves. If you're unsure whether something will affect your loan approval, contact your lender before you do it. A quick phone call can save you from a costly mistake.