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First Time Home Buyer Mistakes – Things to Avoid

What You'll Learn: Mistakes to Avoid for First-Time Homebuyers


Buying a new house can be an incredibly exciting time. But it can also be somewhat stressful if you don’t know what you’re doing. There are some critical first-time homebuyer mistakes to avoid.

Knowing what they are means you can make it through closing and become a homeowner. With that in mind, we’ve created a list of the 12 most common homebuyer mistakes and how to prevent them. 

#1 Not Budgeting for a Home Purchase

One of the essential parts of buying a house is the budget. Creating a home buying budget and sticking to it is crucial when it comes to buying your home. If you don’t figure out how much house you can afford, you could purchase a home that’s too expensive. That could lead you into financial trouble.

Let your real estate agent know your price range, and don’t get caught up in looking at homes that exceed that range. In addition, make sure you leave some money in the bank. You don’t want to drain your savings.

#2 Forgetting About Closing Costs & More

This is one of the biggest first-time homebuyer mistakes to avoid. 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 the costs. These closing costs include charges for appraisal and inspections, title fees, escrow funds for property taxes, and homeowners insurance.

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.

#3 Assuming You Need a 20% Down Payment

For a long time, there has been a belief that you must put down 20% to buy a house. That’s not the case. You can get in with much less. 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)

Putting 20% down makes your monthly payments smaller but is not necessary to buy a house.

#4 Skipping or Hurrying Inspections

Getting a home inspection, although not always required, is still suggested. Before buying a house, it’s essential to get it inspected to make sure there are no significant problems. Some of these include a close inspection of the foundation, walls, and roof making sure there are no termites or leaks.  

Doing a zoning check is essential to see what the rules are if you decide to build an addition, add a tiny house to your property, or make other changes to your home in the future.

#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 gather data from you about your income, debts, credit scores, and how much down payment you have. Then they can calculate how much you can afford and give you a prequalification letter.

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 prequalification first. That way, you can demonstrate to your realtor and the sellers that you are financially qualified.

#6 Not Being Careful With Your Credit

When buying a house, lenders initially pull all borrowers' credit reports when they apply and right before the loan closes. Being careless with your credit, whether that means taking out a new loan, opening a new credit card, or missing a payment, can negatively impact your credit and get your loan denied.

So, if you want to buy a new car — wait until your loan closes and you have your house keys in hand. The same goes for new furniture or anything else. Rather than running your credit card balances up, you want to pay them off if possible.

#7 Making Decisions Based on Emotion

Buying a house is a big life event, and emotions are running high. That’s why it’s so important to stick to your budget and consider your lifestyle. Don’t become emotionally attached to a home for sale. Instead, stay objective.

Keep in mind that buying a home is an investment. Make sure that you’ve chosen a reputable real estate agent that will guide you well. And don’t get carried away in a bidding war where you overpay for a property. 

#8 Not Using a Real Estate Agent

A realtor is your best resource when it comes to buying a house. In most cases, there’s no reason not to use one. Unless you’re buying a For Sale By Owner (FSBO), the agent isn’t paid by the buyer. The seller pays the realtors commissions out of their proceeds, so not using a realtor doesn’t save you any money.

An excellent real estate agent brings experience and valuable advice that even the savviest shoppers need.

#9 Giving Up Too Easily

Finding a home to purchase can take time. If you enter into the hunt with unrealistic expectations, you’re sabotaging yourself. Just like with any industry, there are ebbs and flows. It’s the same with real estate.

Sometimes there is an abundance of homes on the market for sale. That creates a buyers’ market. Other times, properties are scarce, and that drives prices up and makes a sellers’ market.

Work with an experienced agent in the area you’re buying in. That way, you’ll have a good idea of how easy — or hard it will be to find a home. And, you’ll have correct expectations from the beginning.

#10 Fixating on the House & Not Considering the Neighborhood

Finding your dream home is exciting. But a big factor in buying smart is selecting the right neighborhood. 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 make your life difficult. So, besides the home, consider the location and neighborhood.

#11 Being Too Picky & Expecting the Seller to Fix Everything

Throughout the mortgage process, you have to be realistic. That includes once the inspections come back. 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 the 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.

You are mainly looking for significant problems like a broken HVAC or a roof that won’t last very long. So, don’t sweat the small things, and don’t expect the seller to fix everything on the report. 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.

#12 Be 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 all readable.

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.

Now that you know the top first-time homebuyer tips to avoid, happy shopping and good luck!

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Rates starting at % (APR %)¹


Apply before becoming a member.

After your application, we’ll help you:

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2. Open a Savings/Share Account and deposit at least $5


Rates as Low as % APR with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5


1Rates are updated daily at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.