There are a few financial tricks to know and traps to avoid when you want to get a mortgage. Qualifying for a mortgage is far more difficult than qualifying for a credit card or a car loan. Although there are literally hundreds of different mortgage programs available, they are almost all based on the same qualification information - some combination of income, monthly expenses, and credit history. Planning ahead, even as far as a full year, can help you avoid hassles.

Using "Gift" Funds

If you are receiving a gift for all or part of your down payment, arrange to receive the funds several months before your mortgage application if possible and place the funds in your own bank account. Reason: many mortgage lenders place restrictions on the amount and source of gift funds. When you make a mortgage application the lender usually verifies your bank account. If the funds have been in your account for some time, they are considered to be your funds, not a "gift".

If your parents plan to give you a gift just in time for closing, they must be prepared to show your lender that the funds actually exist in their bank account at the time you apply for your mortgage. All parents are different, but many of them strongly resent having to supply their own bank statements to prove a gift to their children.

Large Purchases

Okay, you are excited about buying your house but you need new furniture and appliances. Your car is falling apart. Defer any purchases--particularly credit card or installment contract purchases--until after closing on your new home. Monthly credit card obligations can ruin your expense ratio very quickly. Your idea of the debt you can handle and your lender's idea of the debt you can handle may be two entirely different numbers. Unless you have a VERY high income, do not buy a new car or make any other major credit purchases prior to applying for a mortgage. Car leases count just the same as car payments do.

Current Mortgage Payment History

Lenders check your credit history. If you currently own a home, make sure you do not have any late mortgage payments for 12 months prior to applying for your new mortgage. If your budget is tight, ALWAYS pay your mortgage first.

Avoid Credit Disputes

If you get into a credit dispute over a small sum it could be a good idea to just pay it. It may be against your principles to do so, but the incredible hassle involved in trying to clear up a black mark on your credit history isn't worth it. Check your own credit several months prior to even looking for a house. This will give you time to clear up any problems or misunderstandings! Credit bureaus can and do make mistakes, but unfortunately the burden of proof is on you, not on them. A little financial planning and detective work prior to house hunting can go a very long way in making your mortgage application easy and stress free.