14 First-Time Home Buyer Mistakes to Avoid

A home is one of the biggest purchases you’ll make, and it’s one of the most important and exciting purchases, too. There’s a lot to keep in mind though, and sometimes all of the decisions you have to make during the home-buying process can lead to confusion and mistakes.

Some first-time home buyers don’t realize that they’re making costly errors, so it’s best to have a home-buying plan. With a plan in mind, you can be prepared and avoid these common pitfalls.

To help protect your finances and make the home-buying journey easier, we’ve highlighted some frequent mistakes first-time home buyers should do their best to avoid.


Being Unrealistic About How Much House You Can Afford

Sometimes the house you’ve always wanted isn’t always the house you can afford. There are many risks to not figuring out how big a house you can realistically finance, before you start shopping for a home. The biggest risk is if you purchase a house beyond your budget and then cannot afford to pay for it down the line. If a recession hits or unexpected expenses pile up, you're at risk of losing your home.

How to avoid this mistake: Work with your lender to determine how much you should pay for your house and stick to a budget. Always focus on what you can afford monthly instead of aiming for a home above your means by maxing out your loan. Once you have a target home price, figure out how much money you’ll need for other expenses such as moving and closing costs. One great way to determine your closing costs is by using our Home Buying Closing Costs Calculator.

Shopping for Houses Before Getting Pre-approved

Getting an underwritten pre-approval for a mortgage is an important step in the home buying process, as it informs the seller of homes you’re considering that you’re committed and financially ready to purchase a home. Although it can be fun to shop online and attend open houses before you’ve been pre-approved, this can waste time and energy because you won’t have a good idea of what your price range is until you’ve got that pre-approval letter in your hand.

How to avoid this mistake: Apply with lenders and get a pre-approval letter so that your bid on a home you're interested in is competitive. Once you're pre-approved and ready to shop, check out our guide on how to start looking for a house.

Being Unprepared for the Mortgage Process

From pre-approval to closing, the mortgage application process is a complex part of the home buying experience. It takes time and requires that you gather lots of documentation, such as pay stubs and financial statements. If you don’t gather everything you need or do enough research, you might not get a loan you can afford, and underwriters may reject your application if they can’t validate or cross-check your financials.

How to avoid this mistake: Stay on top of the mortgage process and develop a plan to stay organized. Leverage your real estate agent or friends who are homeowners to help you grapple with the mortgage application process. They can help you decide on a mortgage that’s best for you. One way to prepare for the mortgage process is to first understand home loan and mortgage options.

Not Shopping Around for Lenders

Sometimes first-time home buyers will sign with the first mortgage lender they speak with. This isn’t always the best idea though, as choosing the first lender you talk to can keep you from finding the best mortgage rate. It may be convenient, but you could end up paying thousands more over the life of the loan if you don’t look at a variety of options.

How to avoid this mistake: Put the time in and apply with several mortgage lenders to find the mortgage best for you. By comparing each lender’s rates, lender fees and load terms, points, etc., you’ll find a mortgage deal that’s best for you. Plus, there’s no downside to your credit score. Multiple mortgage lenders making inquiries on your credit in the same timeframe has only a minor impact on your credit rating.

Follow these steps to learn how to shop for a mortgage.

Your Down Payment Is Too High for Your Financial Situation

It’s very tempting for fresh home buyers to make a big down payment, as it can mean enjoying a smaller mortgage and paying less in total interest costs. However, paying a “stretch” down payment can eat up your savings and put you in a riskier financial situation if an emergency were to happen.

How to avoid this mistake: There are pros and cons to paying a smaller down payment vs. a bigger down payment. Choose an amount that’s best for you based on your income and monthly expenses. Read up on down payments too so you can verify you’re making an informed decision. Learn more about the average down payment on a house and what that means for you.

Not Hiring a Real Estate Agent

For some first-time home buyers, a real estate agent is just another expense for a task they can do on their own. Buying a house without hiring a real estate agent is possible, but not advised. Their expertise make them an invaluable resource during the home-buying process. Agents can give you referrals to contractors, educate you on property taxes and generally answer all questions you may have about buying a home. Without an agent, you might realize after closing that you should have negotiated for escrow money to repair a leaky basement.

How to avoid this mistake: First and foremost, hire a real estate agent. Research potential realtors and try to meet with as many as you can before you make a decision. They’ll be your ally throughout the home-buying process, so make sure you find an agent you can trust. Your support network may be able to reference a realtor they’ve enjoyed working with. If you hire a buyer’s agent, you will likely pay a realtor’s commission, but it may be worth it to save you stress in the long run.

Taking on Credit Before the Sale Is Final

Making big purchases like appliances or furniture on credit before you close on your new home is tempting, but it’s best to wait until the mortgage closes. Loan pre-approvals are based on your credit score and debt-to-income ratio. Taking on more credit or taking out another loan can negatively impact both of those factors, which can cause your mortgage lender to reassess your financials before closing. And that might not only delay your closing date, but it could jeopardize the whole deal.

How to avoid this mistake: Avoid taking on any new debt while you’re in the process of buying a house so your credit score remains stable. Hold off on those big purchases until after closing on your home. Before you begin the pre-approval process, make sure you understand what credit score you need to purchase a house.

Not Researching Ways to Save

Saving money during the home buying process is no doubt something you want, but it’s not always easy. Thankfully, saving during this time isn’t impossible. There are many state and national first-time home-buyer programs and grants, such as the USDA loan program and VA loan program, available to qualified buyers who meet certain requirements. If you’re eligible and you don’t apply for these programs, grants and loans, you could be missing out on thousands of dollars in savings.

How to avoid this mistake: Set some time aside to research assistance programs for first-time buyers to see if you meet the criteria. Work with your realtor or financial advisor to learn about programs you qualify for. There are a number of great resources online that highlight the different ways you can potentially save, and clearly outline who is eligible. For example, Nerd Wallet breaks down every first-time home-buyer program by state.

Moving Money Across Accounts Before Closing

Shifting money between bank accounts is a normal way to manage your finances, but it’s something to avoid during the home-buying process. Before your closing date, lenders may view large withdrawals and deposits into bank accounts as suspicious activity, which may complicate finalizing your loan.

How to avoid this mistake: If you can, don’t move large amounts of money around prior to closing. If you have to move money between accounts, keep a paper trail of your statements to show funds leaving each account following pre-approval. This is for the best because most mortgage lenders require two to three months of bank statements before they issue you a loan.

Skipping a Home Inspection

You may be tempted to pass on a home inspection because of costs and because it is not legally required. However, an inspection can reveal critical information about your home that may not have been disclosed. Identifying potential problems before finalizing your home purchase can help you avoid expensive repairs down the line. These problems could be major safety issues like the presence of radon and mold, or illegal additions like a modified garage that’s not up to code.

How to avoid this mistake: While it can cost up to $500, don’t skip out on a home inspection. Budget accordingly for one before making an offer and find a licensed, bonded and trustworthy home inspector who can give you a detailed report on the home’s condition and issues.

Overlooking the Importance of Homeowners Insurance

You know the importance of protecting your home, but homeowners insurance may not be a top priority for you while buying your new home. Most mortgage lenders require that you have homeowners insurance before closing.

It’s equally important you choose a policy with the right blend of coverages to best fit your home and lifestyle. This way you can protect specifically what’s most important to you.

How to avoid this mistake: Make homeowners insurance one of your key purchases during the home-buying process. A good home insurance policy protects your investment and guards your savings from liability claims, so be sure to shop for fire, theft, riot and vandalism coverage. Understanding homeowners insurance doesn’t have to be complicated — we're here to help.

Underestimating the Costs of Homeownership

Even if you think you’ve got a handle on how much you’re going to be paying for your home and all the costs down the road, it can still be easy to underestimate. The cost of owning a house includes property taxes, homeowners insurance and regular maintenance, in addition to your monthly mortgage payments. Not factoring in all these costs and unexpected expenses like repairs and upkeep can lead to financial hardship or require you to take out an additional loan.

How to avoid this mistake: Crunch the numbers and account for those hidden costs into your budget. Make sure you’re saving in an emergency fund for unexpected expenses beyond your control. Estimating costs of repairs can be tricky, so check out our guide to budgeting for home maintenance to help keep your finances on track.

Fixating on Style Over Structure and Neighborhood

Sometimes we choose what looks best even if it’s not in our best interests — and this is especially true for homes. You can always renovate a home, but you can’t move your house to a different neighborhood. That’s why it’s key to find a house in the part of town that matches your lifestyle and interests. The same goes for the home’s condition. A sleek, modern design doesn’t always mean the home’s foundation, roof or electric are in order.

How to avoid this mistake: Your real estate agent can assist you in finding a neighborhood that works best for you. Talk to them as well as your inspector to learn about the home’s condition and utilities. Before you buy, do your best to understand these factors worth considering when buying your first home.

Rushing to Make an Offer

The home-buying process can be draining. Hard work pays off though, and by learning everything you can about your new house you’ll be better prepared for the unexpected. However, rushing into an offer can lead to buying a house that isn’t the best fit for you and your family. It can lead to costly repairs for problems you were unaware of because you jumped in too fast.

How to avoid this mistake: In a competitive market, it’s important to balance acting quickly with making sure the home and neighborhood are right for you. Ask as many questions as you can, do your research and take time to think it over before making an offer. Remember: Manage your anxiety over buying a house by trusting your instincts — and the expert advice of those in your corner.

By keeping these mistakes in mind, you’ll be able to navigate the home-buying process with confidence. To learn more about this journey, check out our first-time home buyers guide for insights and best practices that can help you buy the home of your dreams with confidence.


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