9 First Time Home Buyer Mistakes 

Making the biggest purchase of your life is bound to mean making mistakes.  

A home is one of the most important purchases a person will make in their lifetime. However, like everything, it presents some challenges that, with the proper preparation, are easy to avoid.

Despite extensive research, there are many first-time home buyer mistakes to avoid.  Some people may be too eager to start looking for a home and don’t consider all the implications.

Fortunately, you came to the right place. We prepared a list to make this process easier for you.

Homeownership is a unique experience, and we want to help you make it memorable. 

Whether you are new to the process or haven’t done it in years, it’s essential to understand what goes into this major life decision. 

Along with knowing where the potential pitfalls lie, you will learn about what you could expect and how to know when you’ve found your match.

1. House hunting before a mortgage application

A very common one amongst first-time home buyer mistakes! 

Longtime homeowners are often familiar with the saying about home-buying: “The bank owns the place before you do.” 

They recognize that most sellers don’t want to risk accepting an offer from a buyer who hasn’t secured financing. Selling a house is not like buying a car on credit card points.

Many first-time home buyers start looking for homes without speaking to a mortgage lender: this is a mistake!

The housing market is hyper-competitive, so you have to arrange all your financing in advance, or you’ll lose out to other buyers who can make a firm offer because they’ve already budgeted for the cost of their new home. 

If rates climb before you put an offer on a house, you could wind up paying more than expected — especially if your mortgage rate is higher than average when you go to close the sale. 

The best advice we can give is: Get pre-approved as early as possible so you know exactly how much house you can afford before visiting open houses and looking at homes in neighborhoods with some availability and competition with other buyers.

[Related Article: How to Increase the Mortgage Pre-Approval Amount?]

What you should do:

Don’t get caught up in love at first sight for a house without making sure you can actually afford it.

Many times, buyers get excited about a property without knowing if it’s financially viable for them, which can lead to disappointment or even wasting valuable time on options that are out of their reach.

Before you start visiting houses, talk to a real estate agent and a mortgage broker to understand your purchasing power and get pre-approved.

This will not only help you define a realistic budget but also give you an advantage when making an offer, as sellers tend to prefer buyers with secured financing.

Having clarity on what you can afford will allow you to focus on properties that truly match your financial situation, avoiding unpleasant surprises and making the buying process more efficient and less stressful.

2. Relying solely on one lender

One of the biggest first-time home buyer mistakes you can make when buying your first home is not taking the time to compare several different lenders’ quotes. 

When looking for financing for your first home, it’s easy to fall into the convenience of accepting the first offer you receive, especially if it comes from a bank recommended by family or friends.

However, this could mean paying thousands of extra dollars over the years simply for not exploring better options.

Before committing to a lender, take the time to compare different financial institutions, including banks, credit unions, and online mortgage lenders.

By doing this, you’ll increase your chances of securing a mortgage with favorable terms, ensuring that your home investment is as smart and cost-effective as possible.

Keep in mind that even a small difference in interest rates can translate into significant savings over the life of the loan.

What you should do: 

Get quotes from at least three different banks and, if possible, one mortgage broker. 

Banks specializing exclusively in home loans are the best choice because they can often offer you more money than a regular bank.

Try to get rate quotes all on the same day since rates change constantly. 

Compare interest rates, lender fees, and loan terms. 

You’ll want to find a loan with low-interest rates and affordable lender fees. For example, some loans have higher interest rates but lower lender fees, making them a better deal than comparable loan options with lower interest rates but higher fees. 

Also, you want to consider customer service and lender responsiveness when looking for a lender because both can make your home buying process run more smoothly. 

A real estate agent can help you find the best lender and explain the types of loans that exist and to which ones you could qualify based on your specific conditions.

3. Overspending on a house

There are many attractive features about homes, and it may be hard to compromise on some of those traits when searching for your ideal home. 

But buying a house beyond your budget can become a long-term issue.

Not only could you end up with higher monthly payments than you can comfortably afford, but you might also have to sacrifice other important financial goals, such as savings, investments, or even your quality of life.

Remember, your home is a foundation for the future, not the ultimate goal. It’s better to choose a property that aligns with your financial reality and provides stability rather than burdening yourself with a mortgage that becomes a financial strain.

Additionally, the real estate market tends to change over time. If you buy wisely and within your means, you can build wealth without compromising your financial peace of mind.

Carefully assess your needs and prioritize the essentials over the superficial to make an investment that truly benefits you in the long run.

What you should do:

Take a look at what monthly payments you can expect to pay after purchasing a house. Consider your current expenses (car, insurance, groceries, etc.) plus the mortgage payments against what you have available to spend monthly. 

When determining how much you can afford on your next home, it is wise to consider all aspects of your finances. 

Additionally, tell your broker or lender precisely what you need during this process. Since they’ll be providing the loan, they need to know the risk associated with giving out their investment.

The real estate agent can approximate the amount of money the bank can lend you, how much your monthly payment will be, how much your return will be, or your total expense if you decide to buy a multi-family house and rent the other units.

[Related Article: How Much Money Do You Need to Buy a House?]

4. Rushing the process 

Buying a home can be complicated, particularly when you get into all the paperwork. 

Rushing this process can cost you down the line, so it’s important to be patient and plan well for your future. 

Patience is key here.

Taking the necessary time to organize each step will help you avoid setbacks and ensure you’re making the best possible decision. Every detail matters, from selecting the right loan to negotiating the price and inspecting the property

Save yourself some money down the road by carefully making all the decisions regarding this important purchase. 

Pay attention to every detail.

What you should do: 

Create a timeline that details when you will buy your home at least a year before the purchase. 

Use this time to improve your credit score, pay off debts that could impact your financing ability, and save for a larger down payment, which will help you secure better loan terms.

Additionally, research financing options and speak with lenders to ensure you’re making informed decisions.

By following these steps with patience and strategy, you’ll increase your chances of securing favorable financing and ensure a more stable and beneficial home purchase for your future.

5. Using up your savings

Don’t exhaust your finances on down payment and closing costs!

Many people believe that putting 20% down on a home is the best strategy to lower monthly mortgage payments and avoid additional costs like private mortgage insurance (PMI).

While this can be beneficial, it also carries the risk of depleting your savings, leaving you financially vulnerable to unexpected expenses.

Hint: Not all closing costs must be paid solely by the buyer. In some cases, the seller can cover a portion of these expenses, providing significant financial relief.

A skilled real estate agent can help you negotiate these terms and determine which closing costs apply to your specific situation.

Remember, expenses don’t end once you purchase your home. After moving in, you’ll need to account for additional costs such as furniture, upgrades, unexpected repairs, regular maintenance, and utilities.

Keeping an emergency fund available will allow you to handle any unforeseen circumstances without compromising your financial stability.

What you should do: 

It’s essential to have a financial safety net. 

Consider not depleting savings or retirement accounts that might be used in case of emergency (like extended unemployment, illness or disability, etc.). 

Emptying them when buying your home is risky! 

Instead, find other ways than tapping into these funds to pay a hefty down payment. For example, you can do temporary side gigs to make additional cash. 

Decisions must be made based on numbers, and if a risk is going to be taken, it is because the profit is worth taking that risk.

6. Assuming you have good credit

Before applying for a mortgage, a mortgage lender will examine your credit report to determine if you are a good candidate for the loan. 

Mortgage lenders carefully review your credit report to assess your financial history and determine whether you are a reliable candidate for financing.

This process is crucial because your credit score directly impacts the terms of your loan, including the interest rate, approved amount, and overall financing conditions.

It’s important to note that credit checks don’t just happen at the beginning of the process. In many cases, lenders re-evaluate your credit score before the final approval or even right before closing.

This allows them to ensure that there haven’t been any significant changes in your financial situation that could pose a risk to the loan.

What you should do: 

Keep your finances in check throughout the buying process. 

Don’t open new credit cards, close existing accounts, take out new loans, or make large purchases on existing credit accounts until you have a ratified contract and have moved into your new home. 

Pay down your existing balances to below 30 percent of your available credit limit and pay all costs associated with buying a home on time, in full on top of that, and look into mortgage payment plans if needed.

7. Overlooking the neighborhood

Choosing a home that meets all your criteria is important, but so is its location and neighborhood! 

Picking an area that interests you can add to your life and family’s quality of living. 

Suppose it’s not the right fit for you. In that case, you’ll know relatively quickly when moving in – so don’t dwell on whether or not you like how the floors look or which appliances came with the purchase. 

Instead, pay attention to how potential neighbors interact on a day-to-day basis. 

What you should do:

Before purchasing a home, it’s essential to determine which aspects of a community matter most to you and conduct a thorough analysis of the area where you plan to live. Beyond the house itself, the neighborhood can significantly impact your quality of life and daily comfort.

If you have children or plan to in the future, research the reputation of nearby schools and explore the extracurricular activities and educational resources they offer.

It’s also important to assess commute times to work, supermarkets, hospitals, and other frequently visited places, as long commutes can affect your daily routine and overall well-being.

Additionally, I recommend visiting the neighborhood at different times of the day and week. This will allow you to observe traffic patterns, noise levels, security, and the overall community atmosphere.

Remember, a great location not only enhances your lifestyle but can also make your investment more profitable in the long run.

8. Getting carried away by emotions

Buying a house is undoubtedly very exciting since it is many of us dream. The emotional part is huge between all the first-time home buyer mistakes.

After finding the right home and making an offer, you might get into a bidding war with other buyers. 

Sometimes, buyers that make more money will pay more for a property than first-time home buyers because they have more money to invest. 

Plan by having an emergency fund of at least 6 months of your living expenses. So, if something unexpected happens, you still have enough to cover all costs without having to back down from your purchase. 

Real estate markets come and go, so you should always have contingencies when buying a property – make sure you understand what your payments would look like over time before signing any contracts!

What you should do: 

While it’s exciting to picture your life in a new home, it’s crucial to remember that your decision should be based primarily on financial viability rather than just the emotional appeal of finding the perfect place.

Getting too emotionally attached to a property can tempt you to spend more than you can realistically afford, potentially jeopardizing your long-term financial stability.

A well-planned budget will help you make rational decisions and prevent you from overextending yourself financially.

By maintaining a balanced perspective and making choices based on your real needs and financial situation, you’ll be better prepared to enjoy your new home without long-term worries.

9. Miscalculating homeownership expenses

As the homeowner, you will be responsible for several yearly expenses to keep your property up-to-date and in good repair. 

Sometimes these things can add up quickly, so it’s best to devise a well-formed plan that accounts for everything. 

Right away, you’ll want to account for homeowners insurance premiums, property taxes, and loan (home equity) payments on your monthly budget because someone has to pay.

In most cases, the most significant expense when taking out a home mortgage loan is the down payment. 

But many people don’t realize that they must pay for private mortgage insurance (PMI) to ensure their lender accounts for all homeownership risks, including job loss and foreclosure! 

Private mortgage insurance with an annual premium is between 0.5% and 1.5% of your loan balance, $83 to $250 per month on a $200,000 loan.

What you should do: 

To help you budget, think beyond the monthly mortgage payment and include taxes, homeowner’s insurance, utility bills, and repairs. 

Shop around to get better deals on insurance coverage. 

Finally, aim to set aside at least 1-3% of the home’s purchase price each year for maintenance costs.

Bonus: Not using first-time homebuyer programs.

When buying your first home, every dollar saved matters. That’s why many states, banks, and institutions offer programs specifically designed to help first-time buyers.

From down payment assistance to lower interest rates, these options can make a huge difference in your budget. If you do your research, you might find a great opportunity to make your purchase much more affordable.

However, many people don’t look into these programs and end up spending more money than necessary.

What you should do:

Before jumping into buying, check what programs are available in your area.

Ask your lender or real estate agent about options like low down payment loans, grants or government assistance, local first-time buyer incentives, or exemptions on certain closing costs.

Taking advantage of these benefits can help you lower your upfront costs and make the process much easier.

Lastly,

With all the considerations of buying a home, it can be hard to know where to begin. Now that you understand the common first-time home buyer mistakes, you’re ready to begin looking for your first home and taking the first steps towards homeownership! 

If you’re ready to start, contact a real estate agent today by clicking here or call us anytime at (617)729-2967.

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