The Big List Of First-Time Home Buyer Mistakes

First-time home buyers make mistakes. It’s unavoidable. 

There is too much room for error to get it perfect. Home buyer education can prepare you for your first home-buying journey, but a homebuyer curriculum only gets you so far. 

So, we’ve prepared two lists to help you be a better home buyer.

1. A list of tips for first-time buyers
2. A list of first-time home buyer mistakes, shown here

Consider bookmarking this page. It lists the most common mistakes first-time buyers make that delay or derail their American Dream of homeownership.

Let’s get going.

1. Don’t Assume You Need A 20 Percent Downpayment

You don’t need to make a 20 percent down payment to buy your first home. 

According to the Consumer Financial Protection Bureau, the typical first-time home buyer makes a 6 percent down payment, and only a tiny percentage of first-time buyers put twenty percent down or more.

You can buy a home with a small down payment. There are more than a dozen home loans for first-time buyers that allow down payments of 5 percent or less.

Instead of making the largest down payment when you buy your first home, make the most sensible down payment instead. 

2. Don’t Wait To Start Saving For A House

Ben Franklin famously said: “Money makes money. And the money that money makes, makes more money.”

It’s a quote about compounding interest, which is interest earned on prior interest earned. Compounding interest grows money quickly.

One effective way for buyers to build their savings faster is:

1. Open a high-yield interest savings account earmarked home buying
2. Make additional automatic deposits each month
3. Don’t make withdrawals until you buy your home

As the Philadelphian advises us: set your home savings goals early. The longer you save, the more money you make.

3. Don’t Forget To Save For Closing Costs

Buying a home requires fees and taxes. Even when you do a 100% mortgage such as a USDA loan or VA loan – there are costs beyond the property’s purchase price.

Here’s a sample of closing costs you might see at your settlement:

• Loan origination fees
• Title insurance and settlement fees
• Property taxes
• Escrow fees
• Transfer stamps
• Survey fees

There are even costs when you use a no-closing-cost mortgage because move-in day costs money. Moving companies, home repairs, and household appliances aren’t free.

Have a plan to have some cash.

4. Don’t Buy More Home Than You Can Afford

Every successful home purchase starts with a mortgage pre-approval.

A mortgage pre-approval is a dress rehearsal for your mortgage application. It tells you that your mortgage will be approved and how much home you can afford to buy.

How much home you can buy, however, is different from how much you should buy.

It’s a mistake to let the bank set your budget.

The better pre-approval approach is to determine how much you’re comfortable paying each month, then asking your lender to pre-approve you for that exact payment.

It’s impossible to go over budget when you start with your payment instead of your price.

5. Don’t Skip Checking Your Credit Report

Most home buyers have never seen their mortgage credit score, which is different from the free credit reports available from services like freecreditreport.com.

Mortgage credit reports are specific to the mortgage industry.

The good news is that mortgage pre-approvals include a credit score check and complete borrowing history. You can also get them for free.

As part of your pre-approval, ask your lender to see your credit report. Review it for errors and make improvements. You can also fix your credit score with just a little bit of work.

The best mortgage deals go to buyers with great credit.

6. Don’t Only Speak To One Mortgage Lender

According to a Freddie Mac study, the majority of first-time home buyers talk to one mortgage lender only – even as they admit comparison shopping will save them money.

So, why don’t consumers comparison shop? Nobel Prize winner Richard Thaler says it’s because of irrational consumer behaviors. 

Thaler’s work says home buyers don’t comparison shop because consumers, in general:

• Search too little for solutions
• Are slow to switch from prior choices
• Become confused by complex alternatives

To avoid this mistake, act rationally. Talk to multiple mortgage companies. Give multiple mortgage applications. Comparison shop to get your best deal.

Click to comparison shop with Homebuyer.com. 

7. Don’t Ignore First-Time Home Buyer Assistance Programs

First-time home buyers can access more 800 federal, state, and municipal down payment assistance programs for help with buying a home.

There are 5 main types of first-time home buyer assistance:

1. Down payment assistance
2. Closing cost assistance
3. Cash grants for buyers
4. Temporary interest rate reductions
5. Interest-free mortgages

Some first-time home buyer programs are saved for lower-income buyers and buyers from under-represented socio-economic groups. Others are first-come, first-served with no restrictions at all.

Don’t miss a chance for free homeowne rmoney. Check with your local county website for housing assistance programs and visit the government’s HUD website to find other state and national programs.

8. Don’t Confuse Pre-Qualification and Pre-Approval

A mortgage pre-qualifications is not a mortgage pre-approval. First-time buyers get burned by not knowning the difference.

Pre-qualification

An ballpark estimate of how much home you can buy based on a verbal review of your finances

Pre-approval

An everything-but-the-house mortgage approval based on verified finances 

The difference between a pre-qualification and a pre-approval is that a pre-qualification is worthless and a pre-approval has value.

Mortgage pre-approvals make a reliable framework for a purchase. Pre-approvals use income, assets, and credit score verifications to determine exactly how much home a first-time buyer can buy, at what interest rate, and with what closing costs.

Pre-qualifications do none of those things so get pre-approved now.

9. Don’t Hire The First Real Estate Agent You Meet

Pay attention to who you hire to represent you.

A recent report from the National Association of REALTORS® asked home buyers what they want most from a real estate agent. 

The top 3 answers showed buyers want real estate agents to help them:

1. Find the right home
2. Explain the contracts and paperwork
3. Negotiate great terms

Let’s also note: these are the three most important skills of all great agent – in real estate, sports, Hollywood, or anywhere else. First-time buyers shouldn’t just settle for the first agent they meet.

Great real estate agents understand your local market. They’ve toured many of the homes, submitted offers to purchase for other buyers, and negotiated sales contracts according to local custom.

When you work with a great real estate, you get a better house and pay a better price.

If you cannot tell the difference between a great agent and a bad one, ask a trusted friend for a referral.

10. Don’t Treat Your First Home As An Investment

Some of history’s greatest fortunes have come from owning property. But, as a first-time home buyer, avoid the approach of the real estate tycoon.

Instead, think practical.

When you’re a first-time home buyer, your new home will be your residence. You will live there and it will the center of your life activities. So, buy a home that meets your household needs today.

Also, the typical homeowner moves every 13 years. It’s unlikely this will be your forever home. You can expect to build equity and wealth in your home, but you may want that money to move-up to your next home.

The happiest homeowners live in homes that meet their financial and emotional needs:

• Their monthly payment is manageable and low-stress
• The commute to work is brief and without traffic
• Their neighborhood is a community with friendly residents
• The local school system is highly-rated and well-funded
• There are parks nearby for running, biking, and outdoor activity

Remember that a good home will appreciate. A great home you will appreciate. 

11. Don’t Skip The Neighborhood Tour

Your neighborhood shapes your homeowner experience.

When you purchase a home, you inherit its property line, neighbors, and community. The best and happiest home buyers study up on their prospective homes before they write a contract.

Recognize that it’s hard to meet neighbors during open houses and home tours so try these other home-buying reconnaissance tactics

• Drive through during the weekend and talk to people
• Drive through on a weekday night and talk to people
• Test-drive your new work commute on a weekday morning
• Look for community events, including Meet Your Neighbors and block parties
• Visit the closest grocery store on a Sunday afternoon

You’ll spend a lot of time in your new neighborhood. Get to know it ahead of time.

12. Don’t Overshare at the Open House

Sometimes, it’s best to play it quiet – especially at the open house.

Open houses are events where for-sale properties is opened for public touring. Home buyers can use open houses to walk through a home and get a feel for how its space works.

The seller’s agent is usually on-site to answer questions at an open house. The smartest home buyers will ask questions while offering up little information up about themselves:

• What do you know about this neighborhood?
• Why is the seller moving?
• What is the seller’s timeline?
• Are the home appliances up-to-date?
• Have there been significant repairs to the home?

Every piece of personal information shared is an opportunity to weaken your negotiation.

When you fawn over the home’s incredible curb appeal, for example, or its status as a move-in ready home, it may signal the seller that you’re willing to overpay. Similarly, when you talk about buying a home with bad credit, the seller may think you’re unqualified. 

You have twice as many ears as mouths. When you go to an open house, remember that proportion. Listen twice as much as you speak.

13. Don’t Skip The Home Inspection

A good inspection will save you tens of thousands of dollars in home repairs, systems breakdowns, and insurance deductibles, so don’t skip it.

A home inspection examines a home, its systems, and appliances performed by a licensed professional. Home inspections cost $300-800 to commission, and eighty-six percent of homes require at least one minor or major repair.

Order a home inspection within seven days of going into contract. Select an experienced home inspector for the type of home you’re buying; one who understands your home’s systems, including heating, cooling, plumbing, and electrical.

During the home inspection, an inspector will share maintenance tips and home-keeping advice specific to your home. They may also share that your home requires a new roof or its foundation has creaks or leaks.

The inspector’s findings can be the basis for re-negotiating the contract for repairs, discounts, or cancellation. The money spent is worth it.

14. Don’t Forget To Check For USDA-Eligible Homes

Before you commit to making a down payment, check your eligibility for the 100% USDA mortgage.

The USDA mortgage is a no-money-down loan backed by the U.S. Department of Agriculture (USDA). The loan’s official name is the Section 502 mortgage, named for the section of the Housing Act of 1949, which outlines the program’s rules and regulations.

The USDA loan is for modest buyers of modest homes in non-urban parts of the nation. USDA mortgages tend to be less expensive than other types of mortgages and, when mortgage rates drop, USDA loans can be refinanced inexpensively. 

The main benefits of a USDA mortgage include:

• No down payment required to buy a home
• Lower-than-average mortgage rates
• Flexible standards for buyers with less-than-perfect credit

USDA mortgages are for primary residences. Loans are available with the 30-year fixed-rate option only.

Click here to search the USDA eligibility map.

15. Don’t Skimp On Your Cash Emergency Fund

Life happens unexpectedly, and first-time home buyers without an emergency fund are at higher risk of foreclosure.

Foreclosure is the legal process of a lender repossessing a home after non-payment, then selling it to pay off its mortgage. According to real estate data company Attom, foreclosures affect approximately 30,000 homeowners.

The three most common reasons for foreclosure are:

1. Death of a household wage-earner
2. Illness preventing a wage-earner from working and earning income
3. Divorce, which usually lowers the wages earned within a household

Households with emergencies funds often keep their homes in a crisis. Households without emergency funds often don’t.

Before you save for down payment, save for an emergency fund. Have three months of mortgage payments in your account, at minimum. Six or twelve months is even better.

Life rarely moves in straight lines. Emergency funds protect your life.

16. Don’t Ignore The Rules Of The HOA 

When you’re buying in a homeowners associations (HOA), you lose some of your household freedoms.

Homeowners associations are legal entities that govern planned community, condominium, and townhome developments. HOAs enforce rules and regulations for properties and common areas. 

The stated goal of HOAs is to manage shared amenities, support property values, and improve the quality of life for its residents. Over 74 million Americans live in HOA communities and membership is mandatory.

Rules vary by community and often include the following:

• Make regular HOA membership payments, known as HOA dues
• Maintain the exterior and curb appeal of your home
• Limit the number of automobiles parked at your home
• Refrain from displaying signs on your property
• Maintain regular noise levels

Violating HOA rules can result in fines, penalties, and in extreme cases, legal action.

First-time buyers should review an association’s governing structure before purchasing an HOA-governed property. Make sure the rules, fees, and restrictions align with your lifestyle and expectations.

Advice for First-Time Home Buyers: Questions Readers Ask

I’m ready to start looking for houses. What do I do first?

The first step of every successful home search is getting mortgage pre-approved. A mortgage pre-approval tells you how much home you can purchase and what to expect for your payment. Getting pre-approved also provides you with a Verified Approval Letter, which shows home sellers that you’re a serious buyer. 

Get your mortgage pre-approval here.

Do first-time home buyers have to make a down payment?

No, first-time home buyers do not have to make a down payment. Multiple mortgage programs, including the VA, USDA, and Doctor Loans for Physicians, allow no money down. 

Government assistance programs for first-time buyers such as down payment assistance, forgivable loans, and cash grants for first-time buyers can help make loans 100% financed.

How much down payment does the typical first-time buyer make?

According to the National Association of REALTORS®, the typical first-time home buyer makes a 6 percent down payment. The median down payment for all home buyers is twelve percent.

How do I prove that I’m a first-time home buyer?

There are several answers to “What is a first-time home buyer.” The most common interpretation used by lenders is that a first-time buyer is any person who has not owned the home they’ve lived in for the last 36 months. 

Most first-time home buyer programs use the 36-month definition.