The costliest conventional mistakes: assuming you need 20% down (you don't — 3–5% works), skipping pre-approval, using only one lender, opening new credit or changing jobs mid-process, emptying your savings, forgetting to cancel PMI at 20% equity, and chasing the lowest rate while ignoring fees and total cost. Every one is avoidable — most just take a little planning and the right guide. See the overview, requirements, and process for the full picture.
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Mistakes before you apply
1. Believing you need 20% down
This is the big one. Conventional loans allow as little as 3% down for eligible first-time buyers and 5% for repeat buyers. Waiting years to save 20% in California often costs more in rising prices and rent than the PMI you were avoiding — and PMI cancels later anyway. Fix: run the numbers on buying sooner with less down.
2. Shopping for homes before getting pre-approved
Touring homes you can't finance — or losing one because you weren't ready to offer — is a classic misstep. In California's market, sellers expect a pre-approval letter with any serious offer. Fix: get pre-approved first, then shop with a real budget.
3. Not checking (and fixing) your credit first
Because conventional pricing is credit-based, a small score improvement can move you to a better tier and a lower rate. Applying without a look first can lock in a worse rate than you'd qualify for weeks later. Fix: review your credit early; even paying down a card or two can help.
4. Using only one lender
Rates and fees vary between lenders — Freddie Mac research shows comparing can save over $1,000 a year. Fix: shop multiple lenders, or use a broker who shops many with a single application and one credit pull.
5. Overlooking programs you qualify for
Many buyers never learn they're eligible for HomeReady/Home Possible (3% down, income ≤80% AMI) or California down-payment assistance. Fix: ask about every program before defaulting to a standard 5%-down loan. See Eligibility.
Mistakes during the process
6. Opening new credit or making big purchases
Financing a car, buying furniture on credit, or even applying for a new card can raise your DTI and drop your score mid-process. Fix: buy the couch after closing — nothing new on credit until you fund.
7. Changing jobs mid-process
A job or income change during underwriting can require re-verification or derail approval, especially a move to self-employment or commission. Fix: if a change is coming, tell your loan officer first so it can be planned around.
8. Moving money around
Large, unexplained deposits or transfers force underwriters to "source" the funds and can stall your file. Fix: keep money where it is; document any large deposit (and avoid cash deposits) before you apply.
9. Emptying your savings for the down payment
Draining every dollar leaves you with no reserves for emergencies — and some loans require reserves. Fix: keep an emergency cushion; a slightly smaller down payment with reserves is often the safer structure.
10. Ignoring closing costs
Closing costs (typically a few percent of the price) catch buyers who budgeted only for the down payment. Fix: budget for both, and ask about seller credits or lender options that offset them.
Rate & cost mistakes
11. Chasing the lowest rate while ignoring the total cost
The lowest advertised rate can come with high points or fees, making it the more expensive loan. Fix: compare the APR and the all-in cost over the years you'll own — not just the headline rate. See Rates.
12. Forgetting to cancel PMI
Conventional PMI can be canceled by request at about 20% equity and auto-removes at 22% — but nobody does it for you automatically at 20%. As California values rise, many owners hit 20% sooner than they think and keep overpaying. Fix: track your equity and request cancellation the moment you qualify.
The avoid-these checklist
✕ Don't
- Wait years to save 20%
- Shop homes before pre-approval
- Apply without checking credit
- Settle for one lender's quote
- Open credit or change jobs mid-process
- Make large undocumented deposits
- Drain your emergency savings
- Pick a loan on rate alone
✓ Do
- Explore 3–5% down options
- Get pre-approved first
- Review and improve credit early
- Compare lenders (or use a broker)
- Keep finances stable until closing
- Document any large deposits
- Keep a reserve cushion
- Compare APR and total cost
Common-mistake FAQs
What's the single most common mistake?
Thinking you need 20% down. Conventional allows 3–5%, and waiting to save 20% often costs more than the PMI you're avoiding — which cancels later anyway.
What should I avoid during the process?
New credit, big purchases, job changes, and large money transfers. Keep your finances completely stable from application until you get the keys.
Is using one lender really a mistake?
Often — rates and fees vary, and comparing can save over $1,000 a year. A broker shops many lenders with one application.
How do people overpay on PMI?
By not requesting cancellation at ~20% equity. It auto-removes at 22%, but you can request it at 20% — track your equity as values rise.
Is chasing the lowest rate a mistake?
It can be. A low rate with high points or fees may cost more overall. Compare APR and total cost, not just the headline rate.
Reviewed by the licensing team at Save Financial, a California-licensed mortgage brokerage (NMLS #377740, DRE #01875766) founded in 2009 and serving all 58 counties from offices in Newport Beach and Marina del Rey.