Updated November 21, 2023
Buying a new house can be super exciting. And also stressful at times — especially if you’re doing it for the first time. But don’t worry! We’ve got some great advice to help you avoid the pain points and navigate the home buying process with skill. Here are 12 of the biggest mistakes that first-time homebuyers make — with tips for how to avoid them. That means you can save money, time, and heartache along the way. Ready to dive in? Let’s go.
Mistake #1: Not budgeting for a home purchase
One of the essential parts of buying a house is knowing how much house you can afford and then sticking to it. It may seem counterintuitive, but what you can buy and what you can afford might be two different things.
Here’s why that matters. If you don’t know how much house you can afford, you could purchase a home that turns out to be too expensive for you. That could lead you into heartache and financial trouble.
Do this instead:
- Make a home buying budget and stick to it.
- Let your real estate agent know what your price range is, and don’t get caught up in looking at homes that exceed that range.
- Make sure you leave some money in the bank. You don’t want to drain your savings.
Mistake #2: Forgetting about closing costs and other expenses
This is one of the biggest mistakes that first-time homebuyers make. Before you start shopping and putting in offers, make sure you have a good idea of how much money you’ll need for all of these costs. Closing costs include charges for appraisal and inspections, title fees, escrow funds for property taxes, and homeowners insurance.
The typical mortgage closing costs are between 2% and 5% of a loan’s purchase price.
And, of course, there’s the earnest money deposit and down payment. Have your loan officer go over all the expenses so you can make sure you have enough funds when it comes time to close.
Mistake #3: Assuming you need a 20% down payment
In many cases, you can get a loan with much less. Keep in mind that putting 20% down helps lower your monthly payments, but is not necessary to buy a house. Here are the different down payment amounts based on mortgage type.
- Conventional Loans — 3% to 5% down (has Private Mortgage Insurance until 20% equity)
- FHA Loans — 3.5% down (has mortgage insurance premium)
- VA Loans — 0% down (no private mortgage insurance)
Mistake #4: Skipping or hurrying inspections
Getting a home inspection, even though it’s not always required, is always a good idea. Before buying a house, it’s essential you have it inspected to make sure there are no significant problems. Professional home inspections can detect potential safety hazards you definitely don’t want to inherit — like structural damage, outdated electrical wiring, and deteriorating plumbing materials. Some safety issues — like termites and mold — can be expensive to fix and pose serious health concerns.
Mistake #5: Shopping for a home before applying for a mortgage
Another vital step in the home buying process is finding a mortgage lender and applying for a loan. Once you select your lender, your loan officer will collect important information from you about your income, debts, credit scores, and how much of a down payment you have. They then calculate how much you can afford and give you a pre-qualification letter for that amount.
That’s important. Why? Because if you look for a house before applying for a mortgage, you could fall in love with a property that you can’t qualify for. That’s why it’s crucial to get a solid pre-qualification first. That way, you can demonstrate to your real estate agent and the sellers that you are financially qualified.
Mistake #6: Being careless with your credit
When you’re buying a house, lenders pull your credit reports twice. Once when you’re applying and then again right before the loan closes. Being careless with your credit during the home buying process can mean a loan denial. So, think twice about taking out a new loan, opening a new credit card, making a large purchase, or missing a payment during this period. Doing so can negatively impact your credit and get your loan denied.
Mistake #7: Making decisions based on emotion
Buying a house is a big life event, and emotions can run high. That’s why it’s so important to know how much house you can afford and stick to your budget. It’s a mistake to become so emotionally attached to a home for sale that you make decisions that may not be in your best interest. Stay as objective as possible.
- Choose a reputable real estate agent that will give you professional guidance and answers to your questions. That way, you can make informed decisions that are you in your best interest.
- Don’t get carried away in a bidding war and risk overpaying for a property.
Mistake #8: Not using a real estate agent
An experienced real estate agent is your best resource when it comes to buying a house. In most cases, there’s no reason not to use one. In most cases, the agent isn’t paid by the buyer. The seller pays the real estate agent’s commission out of the sale proceeds, so not using an agent doesn’t save you any money.
An excellent real estate agent brings experience and valuable advice that even the savviest shoppers need.
Mistake #9: Giving up too easily
Finding a home that meets your needs and your pocketbook can take time. If you enter the hunt with unrealistic expectations, you’re sabotaging yourself. Plain and simple. Just as with any industry, there are market ebbs and flows. It’s the same with real estate.
- Work with an experienced agent in the area you’re buying. That way, you’ll have a good idea of how easy — or how hard — it will be to find the right home. And, you’ll have reasonable expectations from the start.
- Don’t let yourself get discouraged. Sometimes the market is flooded with homes for sale. That creates a buyers’ market. Other times, properties are scarce, and that drives prices up and makes a sellers’ market.
Mistake #10: Fixating on the house and not considering the neighborhood
Finding your dream home is exciting. But location matters — a lot. If the property is in a homeowners association (HOA) neighborhood, and you don’t like rules that tell you what you can and can’t do, that could present a problem.
Or if you have big dogs and you’re shopping in a gated community that doesn’t allow fences, that could definitely make life difficult for you. So, don’t just fall in love with the home. Take a close look at its location and its neighborhood before you put your money down.
Mistake #11: Expecting the seller to fix everything
Throughout the mortgage process, you have to be realistic. Like when an inspection report comes in for a house you’ve fallen in love with. No house is perfect, and that includes brand-new homes. There’s always going to be something to fix or upgrade.
That being said, when you get an inspection report back, don’t be surprised if it’s many pages long. A good home inspector will be diligent in listing everything they find.
When you read the report, you should be mostly looking for significant problems like a broken HVAC or a roof that won’t last very long. In most cases, they’ll repair or negotiate on those items that will make the lender unwilling to lend on the property. Other items will most likely be added to your list of to-dos once you’re a homeowner.
- Don’t sweat the small stuff.
- Don’t expect the seller to fix everything on the report.
- Don’t talk to the seller yourself — have your real estate agent be your intermediary do your talking for you. That’s their job. You’re more likely to get a better result.
Mistake #12: Not being proactive with your loan officer
One of the best ways to move your home loan along and close on your home as fast as possible is to be proactive. Initially, your loan officer will give you a list of documents they need. Get the documents to them quickly and make sure they are accurate, complete, and legible.
Then as you move along the process and the underwriter needs more data or documentation, give it to them quickly. Do that, and you’ll be in your new home before you know it.
Hurray! Now you know what to do.
Now that you’ve prepared yourself with a bit of home buying wisdom, it’s time to get out there! Happy shopping and best wishes for finding the home that’s perfect for you. You deserve it.
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