Getting started in real estate investing can be exciting and overwhelming at the same time. The right property can build long-term wealth. The wrong mortgage decision can eat away at your profits and add a lot of stress.

As a new investor, understanding how mortgages really work is just as important as finding the “perfect” property. Below are five common mortgage mistakes new investors make, plus practical ways to avoid them so your next deal supports your long-term goals instead of fighting them.

1. Overlooking Loan Types and Mortgage Options

Not all mortgages are created equal. The type of loan you choose can make or break your investment, especially if you’re buying rental properties in Arizona or flipping homes in California.

Common options include:

• Fixed-rate mortgages: The interest rate and payment stay the same for the life of the loan. Great for predictable cash flow and long-term holds.
• Adjustable-rate mortgages (ARMs): Lower rate at the start, but the payment can increase later. Can work for short-term holds if you understand the risk.
• Interest-only loans: Lower initial payment, but you are not paying down principal during the interest-only period.

The mistake many new investors make is choosing a loan based only on the lowest payment or what a friend used, without matching the mortgage to their strategy.

How to avoid this mistake:

• Decide if you’re holding, flipping, or doing a mix of both before you shop for loans.
• Ask how the payment could change over time and how that impacts your cash flow.
• Work with a mortgage professional who understands investment properties, not just primary homes.

Pro tip: A short-term flip and a long-term rental rarely belong in the same type of mortgage. Make sure your loan supports your exit plan.

2. Skipping a Real Financial Stress Test

Another common mistake is building numbers around “best case” instead of reality. New investors often overestimate rent, underestimate expenses, or assume values will keep going up fast.

That can lead to tight margins and negative cash flow once the property is actually on the books.

How to avoid this mistake:

• Use conservative rent estimates, not the highest number you see online.
• Include vacancy, repairs, maintenance, insurance, taxes, and management in your budget.
• Run the deal using a higher interest rate as a “stress test” to see if it still works.

If you’re looking at hot markets like Phoenix or other parts of Arizona, the upside can be strong—but only if your numbers work in normal and slower markets too.

The Herbert Mortgage Team can help you walk through these numbers so your financing plan lines up with your actual risk tolerance, not just the dream scenario.

3. Ignoring Closing Costs and Mortgage Fees

Many new investors focus only on down payment and monthly payment, and forget about closing costs and fees. That’s a fast way to run short on cash at the closing table.

Closing costs often include:

• Appraisal fees
• Title insurance
• Lender and underwriting fees
• Recording and escrow fees
• Prepaid taxes and insurance

In higher-priced areas like parts of California or Hawaii, these costs can add up quickly and eat into your returns.

How to avoid this mistake:

• Ask for a detailed estimate of closing costs early in the process.
• Plan for a cushion instead of aiming for the exact dollar amount.
• Discuss options to reduce or negotiate certain fees where possible.

At Herbert Mortgage Team, we focus on transparency so you know your true all-in cost before you commit to the deal.

4. Failing to Secure Mortgage Pre-Approval

In competitive markets—from Malibu beaches to Phoenix suburbs—showing up without a pre-approval is a serious disadvantage. Sellers and agents want to know you can actually close.

Without pre-approval, you risk:

• Losing out to another investor who already has their financing lined up.
• Wasting time looking at properties outside your real budget.
• Running into delays when you finally do find the right property.

How to avoid this mistake:

• Gather your tax returns, bank statements, and income documentation early.
• Clean up any credit issues before you start making offers.
• Get a formal pre-approval letter, not just a quick pre-qualification.

With more than 25 years of experience, the Herbert Mortgage Team helps investors move from “interested” to “ready” so when the right property hits the market, you can act fast.

5. Ignoring Future Market and Rate Changes

Real estate is not static. Interest rates change, rents shift, and some markets cool while others heat up. New investors often lock in a mortgage without thinking about what happens if conditions change.

For example:

• Rising interest rates can increase the cost of future purchases or refinances.
• A slower market can flatten appreciation and stretch out your timeline.
• Local changes in Montana or California can impact demand and rental income.

How to avoid this mistake:

• Run numbers for both current and slightly worse scenarios.
• Leave room in your cash flow for repairs, vacancies, and rate changes.
• Stay in touch with a mortgage advisor who keeps you updated on market shifts.

The Herbert Mortgage Team can help you build a more flexible financing plan, so your portfolio is better positioned to handle economic surprises instead of being knocked off course by them.

Set Your Portfolio Up for Long-Term Success

Mortgages are more than just a way to buy property—they’re tools that can either support or weaken your investment strategy. By avoiding these five common mortgage mistakes, you give yourself a stronger foundation for long-term success.

You don’t have to figure this out alone. Our team is here to walk you through loan options, review your numbers, and help you align each mortgage with your investment goals.

Next steps you can take today:

• Schedule a conversation with the Herbert Mortgage Team to review your next deal.
• Ask us to run side-by-side scenarios for different loan types and down payments.
• Join our email list for ongoing tips on financing investment properties in markets like Arizona, California, Hawaii, and Montana.

Ready to move from guessing to planning? Reach out to the Herbert Mortgage Team and start building an investment strategy that’s backed by smart, intentional financing.