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Top 16 First-Time Home Buyer Mistakes That Everyone Makes

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There are a lot of moving parts when you buy a home — especially for first-time buyers. There are common first-time home buyer mistakes you want to avoid.

Beginning with your mortgage pre-approval and ending with your move-in, you will learn about mortgages, tour lots of homes, and become somewhat of a home-buying expert.

All of these pieces leave opportunities for error.

Enrolling in home buyer education is a great place to begin your home-buying journey. Prepare for what’s to come by consulting with your team of real estate professionals. We even have some helpful tips for first-time buyers.

Look over these home buyer mistakes so you can identify potential hurdles and enjoy a smooth road to homeownership.

First-Time Home Buyer Mistakes - Everybody Makes Them!

1. Assuming You Need 20 Percent Down

Graphic: The median down payment of a first-time home buyer is 6 percent

There’s a common misconception in finance and real estate that you need a 20 percent down payment to buy a house, but it’s not true.

A larger down payment can get you a better rate, lower your monthly payment, and increase your equity, so it’s a great choice if you can afford it. Otherwise, you can buy a home with as little as 3 percent down or choose to finance your whole mortgage. Different loans have varying credit score and down payment requirements, and none of them start at 20 percent.

Decide what down payment amount is right for you based on your personal financial goals and budget. You don’t want to devote all of your savings to a down payment, so don’t be discouraged by other buyers’ large down payments.

See all home loans for first-time buyers.

2. Waiting To Start Saving

Saving early allows you to contribute more money overall, and can earn you more with interest from savings accounts. You’ll need cash up-front to cover your down payment and closing costs at least.

Create a separate account for your home-buying savings so you know exactly how much you have to contribute to your house. Automatic deposits can help you stay on track and grow your savings without having to remember when to contribute and how much.

3. Saving For a Down Payment Only

Graphic: What kind of closing costs should first-time home buyers expect to see on their settlement statement?

Your down payment will account for most of your home savings goals, but it’s not the only cost to consider.

You’ll be responsible for several closing costs when you buy a home. Closing costs can include these expenses:

  • Down payment — at least 3% of the home’s purchase price
  • Loan origination fees — 1% of the home’s purchase price
  • Title insurance — varies by location
  • Homeowner’s insurance — 1 year of premiums
  • Private mortgage insurance — up-front premium or monthly payments
  • Property tax — 6 months
  • Escrow fees — 2% of the home’s purchase price

You also want to save money for your move-in plan. This may just be a couple hundred dollars for professional movers. You may also want to install a fence or purchase new kitchen appliances. You’ll be able to better estimate your moving costs once you choose a house, but anticipate these extra expenses from the beginning.

4. Buying More Home Than You Can Afford

Receiving a mortgage pre-approval for a larger loan than you expected is exciting, but that doesn’t mean you should take out a mortgage that large. You know how much you can afford to pay on housing each month better than your lender does.

Create a budget considering your monthly income, recurring expenses, and savings goals to determine how much house you can afford. Buying more house than you can comfortably afford may generate homeownership stress and make it hard to meet your other financial goals.

If you think you can afford more than you currently pay in rent, try following that budget for a few months and contribute the extra housing cost to your savings. You’ll see if it’s a comfortable amount to spend on housing and how it impacts your finances before making the commitment.

5. Skipping a Personal Credit Check

Your lender will check your credit report as part of the pre-approval process, so some home buyers may not see the need to check it themselves. Check your credit score so you know what loans you’re eligible for to help you make the best personal choice.

Checking your credit report also gives you the chance to identify and correct any mistakes, and resolve any negative marks on your report. You can also work to improve your credit to earn a lower rate and more loan options.

6. Consulting With a Single Lender

Explore your lending options and talk with multiple mortgage lenders to shop for the best deals. Different lenders and brokers can offer varying interest rates and mortgage amounts.

Your lender will also be a valuable resource for home-buying education and professional recommendations, so consider which lenders you work well with and trust.

7. Missing Out on First-Time Home Buyer Assistance

Graphic: First-time home buyers who seek educational assistance are more likely to be satisfied with their home-buying journey

Several federal and state housing programs provide down payment assistance and other benefits for first-time home buyers. Some of the programs require first-time home buyer education, which can also provide you with the knowledge you need to buy your first home.

Explore your local, state, and federal opportunities for first-time home buyers.

8. Getting Mortgage Pre-Qualification Without Pre-Approval

Mortgage pre-qualification can provide you an estimate of what loans and rates you’re eligible for, but it’s not a guarantee. A mortgage pre-approval letter guarantees a mortgage amount and interest rate, and gives you buying power to submit an offer on a house. If you’re serious about home-buying, you want a mortgage pre-approval letter.

9. Hiring the Only Real Estate Agent You Meet

Your real estate agent is another important member of your home-buying team. They’ll understand your local housing market and can help you tour homes, submit an offer, and negotiate your contract.

An experienced buyer’s agent will help you secure a great deal while avoiding home-buying stress, so it’s important you have someone you trust. Interview a few real estate agents to get to know them and hire the agent you work best with and who has the local expertise you’re looking for.

10. Buying Without a Long-Term Plan

Buying a home is a large investment and you want to stay long enough to build equity. Your first home doesn’t have to be a forever home, but having a long-term plan can help you choose a house that fits your lifestyle goals.

Balance long-term needs, like a growing family or career goals, with what you can afford and what’s available in the communities you tour. Good local schools and parks are great if you’re planning to have kids, while public transportation and local industry may be more valuable for your career.

11. Skipping a Neighborhood Tour Before You Buy

Moving to a new home includes moving to a new community, so it’s a good idea to greet potential neighbors. Be sure to check out the home’s neighborhood before you buy to make sure it’s a good fit for your lifestyle.

You want to know what entertainment options are available locally, including pools, restaurants, parks, or museums. It’s a good idea to also check the distance to the grocery store, your office, and the hospital to anticipate travel time and costs.

12. Sharing Too Much Information at the Open House

Open houses are an opportunity to see the home and envision your life there. You get to see every room of the house and imagine working in your home office or welcoming guests for a dinner party.

The open house is a good time to talk with the seller’s agent and learn more about the house, too. You can ask about the neighborhood, why the seller is moving, and what their timeline is like. This information can help you make an offer and negotiate the contract.

The seller’s agent will also be able to learn about you and your interests in a house, which they can use when negotiating. Sharing how much you love the back garden or a home’s curb appeal can show your excitement and help you win your bid, but you may not want to disclose details like how much you’re willing to offer.

13. Passing On a Home Inspection

Graphic: A proper home inspection prior to purchase saves first-time home buyers $14,000, on average, in repairs to their new home

Home inspectors will evaluate a house to identify major structural issues, home repairs, and the condition of included appliances. Their goal is to make sure the home is liveable and that everyone fully understands the house’s condition before the sale is finalized.

Home buyers may skip an inspection to save money and time up-front while creating an attractive offer for the seller. It can help you win the bid in a competitive market, but it can become a costly mistake if you find significant damage after you close, especially when you consider that 86 percent of home inspectors find at least one needed repair.

Talk to your real estate agent and friends and family for home inspector recommendations. You can use the home inspector’s report to make sure the house is a good fit and negotiate any needed repairs.

14. Making Decisions Without Regulating Emotions

Buying your first home is an emotional experience and it can be hard not to let your excitement take over. It’s also a large investment that you should make rationally considering your personal needs and finances.

Create a list of needs and wants so you can judge a house and community by how it realistically fits your lifestyle. Stick to your budget and talk the purchase over with your real estate team or a friend for an additional perspective.

15. Assuming You Know the Local Market

Your real estate agent can provide you with a local comparative market analysis (CMA) to inform your offer letter and negotiations.

A CMA compares recently sold and similarly valued homes in your location to determine a fair market value. This process is separate from a home appraisal and tells you how much the home may sell for and how quickly, considering current trends.

16. Opening or Closing New Credit Lines Before You Buy

After your offer is submitted on a house, the lender will perform a final credit check before providing the mortgage loan. New credit inquiries or lines of credit could impact your mortgage total and rates, potentially delaying the closing.

Closing old lines of credit can also negatively impact your credit score. It’s good to pay off your debt, but don’t close any credit until the deal is finished. Delay any new large purchases until after you own your home.

Advice for First-Time Home Buyers: Questions From Our Chat Box

I’m ready to buy a house. How do I start?

Get a mortgage pre-approval to see how much mortgage you qualify for and estimate your monthly payments. This also gives you buying power to submit an offer when you find a house you love.

Mortgage pre-approvals are valid for 90 days, so be sure you’re ready to buy before pre-approval. These are easy to renew, however, if you need more than 90 days to choose a home.

Can first-time home buyers avoid a down payment?

Lenders do require some down payment to secure their loan, but you have options. Some mortgages accept as little as 3 percent down and some lenders are more flexible than others.

You may also be eligible for first-time home buyer assistance. Some programs offer grants, interest-free loans, or tax credits to make home-buying accessible.

How much does the average first-time home buyer put down?

First-time home buyers contribute a median 6 percent down payment. The average home buyer puts a median 12 percent down on their home purchase.

How do you prove you’re a first-time home buyer?

Your loan officer will explore your credit report and assets when you apply for a loan or pre-approval. This report will show if you’ve owned a home in the last three years.

Our Advice: Have Fun When Buying Your First Home

Buying your first home is an exciting step in life that offers stability, comfort, and financial benefits. It’s where you’ll welcome family for holiday dinners, celebrate big wins with your friends, and watch your family grow all under one roof.

Enjoy the special home buying experience without feeling overwhelmed. Learn how emotions help you make better decisions, and have a plan in place when you start home shopping to find a house you love.

Graphic: Download the Emotional Decisions Infographic

Over 2 million Americans bought their first home in 2020. Buying a home requires new information and challenges, but an experienced real estate team and plenty of research can help you avoid these first-time home buyer mistakes. 

Sources: Judgement and Decision-Making

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