14 First-Time Home Buyer Mistakes And Tips To Avoid Them

Buying a house is an exciting process, but it can also be a complex one. Unfortunately, this leads to plenty of mistakes, especially on the part of first-time home buyers.

Throughout the home buying process, there are some pitfalls that are important to avoid, from spending too much to skipping the inspection. Knowing these mistakes and avoiding them can help your home buying journey go more smoothly.

Common First-Time Home Buyer Mistakes

When you’re preparing to buy your first home, make sure to avoid these common first-time home buyer mistakes.

1. House Hunting Without Getting Preapproved

One of the most important first steps in buying a home is mortgage preapproval. During this process, lenders look at your credit score and personal finances to determine whether you’ll qualify for a loan. Preapproval can help you see how much you may be approved for and get an interest rate estimate for your future loan.

Not only does getting preapproved help you set a budget for your home, but it also helps you stand out when you’re shopping for a home. Sellers may be more likely to accept an offer from a buyer who has been preapproved since it shows they’re truly ready to buy.

2. Buying More House Than You Can Afford

For most people, their mortgage is their most expensive monthly payment. And while it can be tempting to spend at the top of your budget to get the best possible house, this is usually a mistake. This is especially true for borrowers who haven’t run the numbers to see how much house they can afford, as many buyers find they’re preapproved for more than they can comfortably spend.

Unfortunately, spending too much on your house can lead to you being house-poor, meaning you have little left each month to spend elsewhere or save for your financial goals. Additionally, if your mortgage payments eat up too much of your budget, a costly emergency could result in you being in a financial hole you can’t get out of.

If you aren’t sure how much you can afford to spend, consider using an online home affordability calculator to find the best home budget for you.

3. Not Hiring A Real Estate Agent

A real estate agent is a knowledgeable professional who can guide you through the home buying process. Not only are agents well-versed in the buying process, but they are also in the know about the local real estate market, which can be an asset to buyers.

Some buyers may find themselves considering skipping a real estate agent to buy a house to lower their costs, but this isn’t the best choice for most people. First, it’s usually the seller, not the buyer, who pays the commissions for both the buyer’s and seller’s agents.

Additionally, opting out of using a real estate agent isn’t always a cost-effective move. In fact, representing yourself in your home purchase could result in you getting a worse deal that actually ends up being more expensive.

4. Skipping A Home Inspection

The home inspection is an important part of the home buying process. During this step, an inspector takes a close look at the home to look for any issues that may need repair.

When you’re shopping for a home, especially in a seller’s market, it may be tempting to skip the inspection in the hopes that it’s easier to have your offer accepted. However, this often backfires. After all, an inspection could uncover repairs to the tune of thousands or tens of thousands of dollars.

Depending on your contract, expensive repairs that arise during the inspection may allow you to renegotiate the terms of your home purchase. You can either ask the seller to cover the repairs or agree to a lower price so you can pay for them after you close.

5. Assuming You Need 20% Down

It’s a common myth in the real estate industry that you need a 20% down payment to buy a home, but that’s simply not the case. In fact, the average down payment for a first-time home buyer is only about 6%. And depending on your local program, you may not be required to make a down payment at all. Conventional loans require a minimum of 3% down, while certain government-backed loans require 0% down.

Of course, there are benefits to a larger down payment, including a lower loan payment, a lower interest rate and the potential to avoid private mortgage insurance (PMI). If possible, consider saving for a down payment before taking the next step in buying your first home.

6. Draining Your Savings

Buying a home often requires significant upfront costs in the form of a down payment, as well as closing costs and fees. Unfortunately, some borrowers save just enough to cover these costs without setting aside any extra funds. That means that when it comes time to close on the home, they have to drain their savings to do so.

When you’re saving for a home, it’s important to save for more than just those required upfront costs. You’ll also want money set aside for home repairs, moving expenses and any planned emergencies.

How much money you need to buy a house depends on a variety of factors, including the price of the home you’re buying and your overall financial situation, so it’s important to run the numbers for your unique situation to ensure you save enough.

7. Not Looking Into Government Loans

When you’re shopping for your first home, you may assume your only option is a conventional loan. But depending on your situation, you may also qualify for one or more government home loans, which can make it easier to qualify for a mortgage or make your loan more affordable.

While there are a variety of home loan types, government loans offer some unique benefits. For example, an FHA loan requires a much lower credit score than a conventional loan while still offering a lower interest rate. And VA loans and USDA loans require 0% down without mortgage insurance, meaning you may be able to buy a home more quickly.

If you aren’t sure what your loan options are, a loan officer with your preferred lender can talk you through the various loan types and identify the one that’s best for your situation.

8. Not Comparing Multiple Mortgage Lenders

Don’t just get a mortgage from the first lender you’re preapproved with. Instead, make sure to shop around and get quotes from multiple lenders to choose the right lender for you. When shopping around, you’ll find that different lenders offer different loan types, interest rates, loan terms and more.

The preapproval stage is a great time to compare several different lenders. You can apply with multiple lenders without it having a great impact on your credit report. And finding the lender offering the best interest rate can save you thousands – if not tens of thousands – on your overall loan costs.

9. Not Using First-Time Home Buyer Assistance Programs

There are a variety of first-time home buyer programs designed to make it easier for people to access homeownership. These programs are often available through statewide and local government agencies or nonprofit organizations. In many cases, these programs offer grants or loans – sometimes forgivable ones – to help buyers cover their down payments and/or closing costs.

While not all first-time buyers will be eligible for assistance programs, it’s worth exploring the various options to see if you’ll qualify. After all, help with your down payment and closing costs could help you buy a home far more quickly than you otherwise would be able to.

10. Waiving Contingencies

Many home purchase contracts include contingencies, which are clauses that allow either party to back out of the sale in certain situations. Some common contingencies for buyers allow them to back out of the sale based on the inspection or the appraisal.

For example, an inspection appraisal would allow you to back out if there are substantial repairs required on the home. Similarly, an appraisal contingency would allow you to back out if the home appraises for less than the agreed-upon price, meaning the lender wouldn’t cover as much of the cost.

Waiving contingencies can make it easier to have an offer accepted, especially in a seller’s market. However, it can also come back to haunt you if there’s an issue with the inspection or appraisal and you have to pay thousands of dollars or more out of pocket.

11. Not Checking Your Credit

Your credit score plays an important role in the home buying process. First, your credit score impacts whether you qualify for a mortgage in the first place. Each loan program has its own minimum credit score requirement.

Your credit score will also impact your loan interest rate. The better your credit score, the lower the interest rate you can get. Even a small difference in your interest rate can result in substantial savings over the course of your loan.

12. Not Researching The Neighborhood

When you’re buying a home, it’s not just the house itself that you’re committing to – it’s also the neighborhood. The surrounding area can impact a variety of factors, including the local crime rate, the quality of the school district and more. Therefore, when you’re deciding where to live, make sure to keep these characteristics in mind as well.

13. Being Impulsive

The home buying journey is the last time you want to make impulsive decisions. Buying a home can be an emotional process, and the stress of buying a house could lead you to make an impulsive decision, such as buying a home that’s out of your budget or that doesn’t check all of your boxes. Instead, approach home buying with a measured approach to ensure you make the best decisions not just for right now but also for the future.

14. Not Calculating Homeownership Costs

You may be surprised to learn your homeownership costs are more than you thought they would be. When running the numbers, many future homeowners only take into account the principal and interest payments on their mortgage. But the monthly costs can also include:

• Monthly mortgage payments
• Property taxes
• Insurance
• Utilities
• Maintenance and repairs

In addition to the monthly costs of homeowners, there are also one-time costs. For example, you’ll have to pay your down payment, closing costs (which could be between 3% – 6% of your loan amount), moving costs and more.

The Bottom Line

When you’re buying your first home, it’s easy to fall victim to mistakes that can cost you money in the long run. But when you know these common stumbling blocks ahead of time, you can avoid them and ensure your home buying process goes as smoothly as possible.

If you’re getting ready to buy your first home, start the mortgage application process today and see what you may qualify for.