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15 First-time home buyer mistakes to avoid

By knowing these first-time home buyer mistakes, you can save yourself time, money, and hassle. Learn more.

Anna Baluch
March 25, 2024

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Buying your first home is a rollercoaster of excitement, nervousness, and thrill. However, it’s all too easy to make mistakes that can cost you time and money. 

Becoming familiar with these blunders before you begin the homebuying process can increase your chances of a smooth, stress-free experience. Let’s explore first-time home buyer mistakes and how you can avoid them.

15 First-time home buyer mistakes to avoid

Many potential pitfalls may pop up while you're looking for and buying a house. So it’s important to find tips on your first search and to help guide you through the sale. 

1. Looking for a home before prequalifying for a mortgage

It may be tempting to visit open houses and showings the moment you decide you’re in the market for a home. However, it’s a good idea to get prequalified beforehand. 

By applying for a mortgage and prequalifying ahead of time, you’ll know what you can afford, helping you narrow your search. Otherwise, you may find your dream home isn’t feasible given your financial situation — which can be disappointing. You’ll also position yourself as a more serious buyer in the eyes of sellers because it shows that you’re financially ready to purchase a home. 

2. Not working with a real estate agent

A realtor is an expert who helps you confidently navigate the homebuying journey from start to end. Realtors often help you find a house that meets your needs, educate you on the buying process, and negotiate lower sales prices, closing costs, or other fees. 

They can also refer you to other trusted real estate professionals you might need, such as mortgage lenders, real estate attorneys, appraisals, and home insurance agents. These professionals are experts in various aspects of homeownership and can ensure you’re equipped with all that you need. While you’re not legally required to hire a realtor, it’s a great way to streamline the process and avoid the stress of doing everything yourself. 

3. Ignoring the neighborhood 

You can remodel and renovate a home, but you can’t change its location. That's why it’s essential to scope out the neighborhood of any property that piques your interest. Your goal should be finding a neighborhood home that aligns with your lifestyle, needs, or future goals.

For example, if you want to start a family, you may want to live in a good school district or near a quality park. Alternatively, if you're a retiree or empty nester, nearby activities may be more top of mind. 

To determine whether you like a neighborhood, create a checklist of what you're looking for. Then, explore the area to see how it compares. Consider speaking to business owners, as they generally have a good sense of the neighborhood. Additionally, you can visit nearby amenities as well as local events to get a better feel of the community. Make sure to visit the neighborhood during different times of day and days of the week. 

4. Emotional buying

There's no denying that buying a home for the first time is an emotional process. However, as with any other financial investment, you should make decisions based on facts rather than emotions. Doing so will help you avoid red flags and mistakes, ensuring you're pleased with your home in the long run.

For example, if you get too eager and skip recommended inspections or steps to meet the seller's timeline, you could miss severe (and costly) issues. 

5. Waiving inspections and title searches

A home inspection can reveal serious issues with a home's structure or main components. It can also help you better understand any necessary repairs and get an estimate on the additional expenses. Generally, you can use the information to negotiate repairs or even reduce the asking price. 

Title searches are one of the best ways to find liens on a property or other issues. As a result, you can resolve them before you commit to a home. If you waive an inspection and title search, you could face expensive and pesky issues down the road.

6. Getting just one mortgage quote

Shopping around for a rate can be time-consuming as you’ll likely need to consult a professional and submit various financial and personal documents. However, if you go with the first quote you get, you may end up with a higher interest rate, costing more money over the life of your mortgage. Additionally, you may find better terms or perks if you look around. It’s well worth your time and energy to request quotes from different mortgage lenders, as they’re not created equal.

7. Assuming you need a 20% down payment

A common home-buying myth is that you need 20% of the purchase price to cover the down payment. While a 20% down payment can help you avoid private mortgage insurance (PMI) in some cases, it may be challenging to offer as a first-time home buyer. 

Fortunately, you can still get approved with a smaller down payment. According to the National Association of Realtors, the average down payment for first-time home buyers is 8%. 

As long as you budget for all expenses appropriately, you may have more options than you initially thought. 

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8. Neglecting first-time buyer programs

There are a variety of state-specific first-time home buyer programs designed to make homeownership more affordable. These programs can assist with aiding your down payment or covering closing costs. 

Some even offer cash grants or lower interest rates. If you don’t take advantage of these programs, you could leave free money on the table. Check with your state’s housing authority to learn about which first-time buyer programs you may qualify for.

9. Ignoring FHA, VA, and USDA loan programs

Conventional financing is usually the first thing that comes to mind when considering mortgages. However, several government-backed home loans may be a better option, including: 

  • FHA Loans: Backed by the Federal Housing Administration (FHA), FHA loans typically have lower minimum credit scores and down payment requirements. The caveat is that you must pay a mortgage insurance premium (MIP) until you own 20% equity in your home. You may qualify for an FHA loan if you have a credit score of at least 580 and a 3.5% down payment or a minimum credit score of 500 and 10% down.
  • VA Loans: Guaranteed by the U.S. Department of Veterans Affairs, VA loans are for military members, veterans, and their families. If you’re part of the military community, you may be able to lock in a VA loan with zero percent down. Just be prepared to pay a funding fee instead. 
  • USDA loans:  The U.S. Department of Agriculture (USDA) offers USDA loans to buy homes in rural areas. If you and your prospective home qualify, you can take one out with a 0% down payment. However, you will pay a guarantee fee (1% of the loan) and annual fees.

10. Forgetting to factor in other home-buying costs

Most people only think of the down payment when preparing to leap into homeownership. However, the true cost of saving for a house entails many more expenses: 

  • Closing costs: Closing costs usually include application fees, appraisal fees, title fees, and other expenses involved in transferring the home from the seller to the buyer. You'll likely have to pay between 3% to 5% of the purchase price of your home in closing costs. 
  • Home upgrades: In a perfect situation, you could move in without making any improvements or upgrades. Since this is unlikely, you should plan for home maintenance costs, such as replacing outdated fixtures or appliances. 
  • Moving costs: Whether you're moving across the street or country, you'll have moving expenses. Even if you pack and move most of your belongings independently, you may have to invest in packing materials and a truck.

11. Draining your savings

Buying your first home is thrilling, so you may want to splurge and deplete your savings. However, being a homeowner without a security net will make you financially vulnerable. 

If you move in and find unexpected maintenance issues or lose your job, you may have to take on debt to cover costs. An emergency fund protects you from life's emergencies, so keep yours intact. 

12. Making a big purchase while trying to buy a home

If you’re in the process of buying your first home, it’s best to avoid making a big purchase, like a new car — unless you can pay for it in cash. Racking up additional debt while waiting to close can increase your debt-to-income (DTI) ratio, which compares how much you earn to what you pay in debt monthly. Major financial transactions during a home purchase are huge red flags for banks, and your lender may change their mind and turn down your application for a mortgage. Wait until after you close on your home to make larger purchases. Any hard inquiries on your credit report can also drop your score, risking your eligibility. 

13. Waiting for a “unicorn” house

Finding a home that checks off all your boxes can be difficult, especially if you have a long wishlist. If you look for perfection, your home search could take a while, or you might get stuck on a home you can’t afford. Instead of waiting for a “unicorn,” balance your needs and wants. 

Make a list of must-haves, nice-to-haves, and things you can live without. Also, be open-minded and consider homes with “good bones” in neighborhoods you like. You can always renovate the inside and outside to better meet your needs at a later time.

14. Overspending upfront and forgetting ongoing costs

If you budget and plan well, you can save a lot toward purchasing your first home. However, before signing on the dotted line, be sure you know that monthly mortgage payments aren’t the only ongoing costs you’ll have. 

Many expenses are tied to owning a home — some will be fixed, and others will depend on your home's size and location. Such as: 

  • Property taxes: Property taxes are based on the value of your property. They're typically paid monthly and part of your mortgage payments. Keep in mind that they can fluctuate.
  • Insurance: Homeowners insurance is designed to protect your property and personal belongings in the event of a disaster, such as theft or a severe storm. It's usually required by the mortgage lender and rolled into your monthly loan payments. 
  • Homeowners Association (HOA) fees: Depending on the neighborhood and home you choose, you may live under an HOA and have to pay fees. These fees are typically due monthly, quarterly, or annually and cover maintenance, such as landscaping, snow removal, and shared amenities.
  • Routine home maintenance: No matter where you live, your home will require yearly home maintenance. The larger the property, the more work (and money) will go into it. 

Look at your 5-year financial plan to ensure your home's future costs won’t derail your long-term goals. Remember that your first home doesn't have to be your forever home. You can always upgrade in the future as you earn more money and your financial situation improves. 

15. Not comparing loan options

Depending on your situation, it's worth exploring various types of mortgages. You can choose from a fixed-rate or adjustable-rate mortgage. A fixed-rate mortgage has the same interest rate over the life of the loan, meaning your principal and interest rate will stay the same. 

An adjustable-rate mortgage, however, has an interest rate that changes after a fixed introductory period, which may be three, five, seven, or ten years. 

If you're a first-time homebuyer, you may feel more comfortable with a fixed-rate mortgage, especially if you plan to stay in your home for a long time. An adjustable-rate mortgage might make more sense if you plan to move or refinance before the intro period ends or if you believe your income will significantly increase.

Final thoughts

By educating yourself on first-time home buyer mistakes, you can save yourself a lot of hassle and headaches – not to mention money – throughout the process. Best of luck in your journey to homeownership.

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