Do you know the most common first-time home buyer mistakes?
You probably feel overwhelmed if this is your first time buying a house.
There is a lot to learn, and it can feel like a bit of a juggling act—which can be hard to do when you’ve never juggled before.
Fortunately, plenty of people have gone through the home-buying process you are dealing with now, and you can learn from their mistakes.
Check out the following list of common first-time buyer mistakes so that you can spot them before you fall into similar traps.
That way, you can move forward with your purchase with more confidence and fewer regrets.
Understanding what you should do before buying a house will go a long way toward helping you avoid common missteps.
From thirty eight years of experience as a Realtor, making blunders in real estate is not uncommon.
Purchasing a house isn’t something you do everyday. Unfortunately, when you don’t have a professional in your corner it’s easy to have missteps.
First-time home-buying seminars and leaning on real estate professionals for help can be worthwhile.
Essential Facts and Statistics on Homebuying
1. Many first-time home buyers underestimate the costs involved in homeownership, such as property taxes, maintenance, and insurance.
2. Lack of proper research and planning can lead to buying a house that doesn’t meet their needs or budget.
3. Some first-time buyers make the mistake of not getting pre-approved for a mortgage, which can negatively impact their ability to secure financing.
4. Many don’t understand that a pre-qualification differs from a pre-approval when getting a loan.
5. There is often a lack of knowledge of mortgage products, which can impact rates and payments.
6. Rushing into a purchase without conducting thorough inspections can result in unexpected repair costs or hidden issues with the property.
7. Emotional attachment to a particular property can prevent first-time buyers from considering other factors like location, resale value, and future market trends.
8. Approximately 95% of first-time home buyers underestimate the additional home costs.
9. Over 80% of first-time home buyers regret not getting a professional inspection before closing their homes.
10. Studies show that nearly 70% of first-time home buyers fail to shop around for the best mortgage rate, potentially costing them thousands of dollars.
11. Around 60% of first-time home buyers go over their budget during the buying process.
12. Research suggests that more than half of first-time home buyers make hasty decisions without fully understanding the terms and conditions of their mortgage agreements.
What Are First-Time Home Buyer Mistakes?
A first-time home buyer mistake is when you enter into a real estate transaction, and either you don’t prepare correctly or do something during the process that will cause regret.
Let’s examine the buying mistakes you want to avoid to ensure a smooth real estate transaction.
1. Not Preparing Yourself Financially.
One of the essential things you need to do as a first-time home buyer is to prepare yourself financially.
Understanding how to get a mortgage is crucial in your journey to homeownership.
Preparing for purchasing a home should occur well before looking at a property.
Financial preparation starts by ensuring your credit scores are accurate, having stable employment, establishing a solid down payment, and putting money away in an emergency fund.
You need to do all of these things before making an application. Borrowers need to get their documentation together early in the home buying process.
2. Failing to Get Mortgage Pre-Approval
The home-buying process tends to be exciting. As a Realtor, I understand the urge to jump in without much thought. However, shopping for a home before getting a pre-approval can be a big gaffe.
Taking the time to apply for approval upfront benefits home buyers in several ways. Getting approved is the simplest and most accurate way to determine how much house you can afford. You may think you have a handle on all the costs of owning a home, but this isn’t the time to risk human error.
By getting your initial approval through a mortgage lender, buyers have a reliable price range to stay within, so they don’t set their sights too high or take on more than they can handle. Having a mortgage pre-approval will be mandatory with sellers and listing agents.
You may see some lenders use other terms like prequalified and pre-approved. Pre-qualification often provides a preliminary estimate of what you can afford, but it doesn’t give you the financial backing that home sellers might be interested in seeing.
By verifying some of your financial information, lenders can also offer pre-approval. Sometimes, homebuyers will make the mistake of letting their pre-approval expire. Don’t be one of them! A pre-approval is usually good for 90 days.
3. Speaking to Only One Mortgage Lender
Once these things are done, the next phase is choosing an excellent lender to work with and getting pre-approved for a mortgage.
Most think picking a lender is about finding the best mortgage interest rate. While that is undoubtedly an important consideration, it is not the only one.
When interviewing a lender, you should ask many pertinent mortgage questions. The answers to these questions will help determine if the lender is the right fit.
You’ll also educate yourself on the mortgage process, which is essential for a trouble-free financial transaction.
Talking to only one lender can end up being a costly mistake. When getting loans, it is always wise to use multiple quotes. Without doing so, it’s possible not to bring the best interest rate and other terms.
Decisions like this are snafus that lead to a higher mortgage payment. Going to the bank you’ve been doing banking with isn’t usually your best bet. Many banks don’t have great home buyer programs.
4. Not Investigating Government-Backed Loans
When contemplating mortgages, the majority of home buyers typically consider conventional financing. A significant lapse in judgment is not researching other types of loans. When house-hunting, first-timers should consider these home loan programs.
Here are three of the most commonly utilized options:
- FHA loans: An FHA loan is supported by the Federal Housing Administration, providing protection to the lender in the event of loan default and thus ensuring more favorable loan terms. These loans generally entail lower down payment and minimum credit score prerequisites, although a mortgage insurance premium (MIP) will be necessary. From experience, these are excellent loans for first-time buyers due to their lower down payment and credit score requirements.
- VA loans: VA loans are mortgage options available to eligible veterans, active-duty service members, and surviving spouses. These loans are supported by the Department of Veterans Affairs, reducing the lender’s risk and enabling them to provide loans to potential buyers in challenging financial circumstances.
- USDA loans: A USDA loan is backed by the U.S. Department of Agriculture and can make purchasing a home in rural areas more affordable.
Luke Skar, a loan strategest at Madison Mortgage says there are significant benefits to a USDA loan including, no down payment options, a competitive mortgage rate, and flexible credit requirements. Luke went on to say in some cases they are the perfect loan for homebuyers in rural areas.
There are many homebuyer programs you may not have considered. It is vital to explore mortgage lenders that offer these loans.
5. Not Checking Your Credit Report
Unfortunately, your credit report could contain errors, and you don’t even know it. A copy of your credit report is essential when buying a home for the first time.
You can get a free copy of your credit report from the three primary credit bureaus. Your credit score is a significant factor in the mortgage terms you will receive from a lender.
A good credit score will be rewarded. Don’t make this first-time home buyer mistake. Get a copy of your credit report before you meet with lenders.
Look it over carefully for any mistakes. If you find some, get them corrected immediately. See the credit score needed to buy a house. Some banks will be better than others for credit scoring requirements.
6. Thinking You Need a Twenty-Percent Down Payment to Purchase.
One of the most significant mortgage myths is that you need twenty percent down to purchase a home. Who knows how this home-buying myth started? It is way off base. Most home buyers don’t put down a sizeable down payment.
There are many mortgage programs for first-time buyers, and most don’t require twenty percent down. Some popular loan programs include FHA, VA, USDA, and traditional conventional mortgages.
The average down payment for a first-time buyer is only around 6 percent.
It should be noted, however, that when you put less than twenty percent down in a conventional program, you’ll be required to pay private mortgage insurance. However, there are ways first-time buyers can avoid paying PMI.
7. Buying A House You Can’t Afford
While an initial mortgage approval estimates the affordable house price, it may not always align with your budget due to variations between your debt-to-income ratio (DTI) and overall monthly expenses.
When a lender assesses your financial details for approval, they use your DTI to gauge the portion of your monthly income allocated to debt payments. However, DTI doesn’t encompass all expenses. For example, your finances can be impacted by paying for gas for your vehicle, groceries, utilities, and other daily expenses.
Consequently, purchasing a home equal to your approved mortgage amount may pose challenges in managing other monthly obligations.
Consider any monthly expenses that may not have been included in the initial approval process. Along with your current budget, consider additional costs associated with homeownership, such as closing costs, maintenance, and the possibility of higher utility expenses.
Over the years as a real estate agent, I have witnessed people purchasing in a higher price range than they should. They end up in debt and unable to enjoy life.
8. Failing to Do Your Due Diligence.
Looking at homes can be a pleasurable experience. At times, buyers make the mistake of getting caught up in the glitz of a particular property.
When house hunting, it is always essential to look at a home’s history.
The “shiny object” looks so appealing that other potentially essential details can be missed. Sometimes, home-buying red flags are overlooked.
Often, these things include external forces that could negatively affect a property’s appeal. Some of them could bring down the property value.
Since you make the final purchasing decision, it is up to you to do your due diligence. That means conducting sufficient research about the property and the area to ensure you don’t miss red flags.
Make a list of things you need to look into—like reviewing if permits were taken out for improvements and checking the sex offender registry to see any sex offenders nearby.
Completing these tasks before you commit to making a purchase is essential.
9. Allowing Your Emotions to Get The Better of You.
This is probably the biggest purchase of your life thus far, so you can expect to deal with some strong emotions.
However, it is essential to remember that this is a business decision best made with a clear head.
If you have specific financial limitations, they should dictate your decision even when you come across a home that seems ideal but is out of your budget.
One of the common ways this can happen as a buyer is when you get caught up in a bidding war for a home you love. A common home-buying mistake causes people to lose sleep at night.
You’ll often end up with a bad case of “buyer’s remorse.”
10. Not Accounting For The Total Cost of Buying a Home.
Many costs are associated with buying a home beyond the actual purchase price. Closing costs are the costs that most often surprise first-time buyers.
These fees required to complete the transaction can add up to 2 to 5 percent of the purchase price. Here is an excellent summary of all the costs when buying a home. The last thing you’ll want is surprises, especially when you are a first-time buyer.
Talk with all the parties involved that may charge you fees to be aware of what you are facing, including your agent, your lender, the insurance company, the title company, etc.
11. Not Giving a Chance to Homes That May Seem Less Than Ideal at First Glance.
If you are on a budget, you must keep an open mind about the homes you will consider. Sometimes, a beautiful home will be poorly photographed or otherwise poorly marketed, so most buyers avoid it automatically.
But if your buyer’s agent tells you it is still worth considering, listen to them. You may discover a property that is perfect for your current needs.
Sometimes, the best-looking home online turns out to be a dud in person. The opposite scenario can also occur because of the reasons mentioned above.
12. Skipping The Home Inspection
One of the essential steps in buying a house is the inspection. Inspections for homes allow buyers to find out the exact condition of the property they purchase.
Without having a professional home inspector look over the home, the chances of buying a lemon rise dramatically. One of the mistakes first-time buyers make is assuming there are no problems.
Just because a home looks clean and inviting doesn’t mean there are no underlying issues. A typical home buyer mistake is waiving an inspection to “win the bid.”
It may seem like something you must do, but that isn’t always true. Over the last few years, buyers have found out the hard way that there are numerous problems in the homes they have bought.
It is wise to have a checklist for home inspections and follow it carefully.
13. Only Paying Attention to The Home.
The area where the home is located is arguably just as important as the actual property.
Many first-time buyers are so fixated on the house that they fail to account for the area, which is a mistake.
Many factors related to the location will significantly affect your living experience, including the crime rate, traffic, public transit options, school systems, amenities, and more.
For example, if you love walking your dog but have nowhere to walk near your home, you could quickly become frustrated with your purchase.
Do careful research to ensure your required amenities are within a fair distance of your home.
Picking the right neighborhood is an essential part of your home purchase. Attention to how the neighboring properties look is also a crucial consideration.
Will you be able to get along well with the neighbors?
Also don’t forget about your commute from various neighborhoods. Some will end up in a situation that doesn’t suit them. Making drastic compromises can end in disappointment.
14. Not Interviewing and Hiring a Buyer’s Agent
One of the glaring missteps of some homebuyers is not interviewing and hiring a buyer’s agent.
Going directly to the listing agent or using multiple agents to look at homes isn’t wise.
It would help to have a dedicated Realtor as a fiduciary in your corner. Finding an exceptional buyer’s agent offers many benefits.
With an exceptional real estate professional, you can expect the following:
Expert Negotiation Skills: A buyer’s agent can negotiate on your behalf to get the best possible price and terms for the home you want to purchase.
Market Knowledge: They deeply understand the local real estate market and can provide valuable insights into pricing and trends.
Access to Listings: Buyer’s agents have access to a wide range of property listings, including some that may not be publicly available, giving you more options to consider.
Guidance and Advice: They can guide and advise throughout the home-buying process, helping you make informed decisions.
Paperwork and Legalities: They can handle the paperwork and legalities involved, ensuring everything is done correctly and efficiently.
Support and Advocacy: A buyer’s agent acts as your advocate, looking out for your best interests and providing support at every step.
Time-Saving: They can save you time by finding properties that match your criteria, scheduling showings, and coordinating with other parties involved in the transaction.
15. Failing to Clarify What Role Real Estate Agents Play in The Transaction.
Real estate agents can serve a variety of roles in a real estate transaction—and not all of those roles will benefit you as a buyer.
The seller’s agent is focused on getting the best deal for the seller, not you. So, if you go into an open house and start explaining all your goals and limitations to the agent showing the house, which is the seller’s agent, you could compromise your position.
The difference between a listing agent and a selling agent is monumental.
One of the biggest potential problems with agents is if they serve as dual agents. Not all states allow dual agency, but you want to know about it if you interact with a dual agent.
The dual agent will attempt to represent both the seller and you, the buyer, which is impossible.
You and the seller have different goals.
Be sure to ask the agents you are working with who they represent so that you can put your trust in those who have your best interests in mind.
The most vital thing to understand about dual agency is that YOUR agent will no longer be able to guide you during the sale. Doing so is forbidden by law and is one of the reasons why dual agency is so controversial.
The ONLY person who benefits from dual agency is the real estate agent!
To be clear, your agent will not be able to do the following things:
- Point out any flaws with a property.
- Give you guidance on what you should offer for a home.
- After a home inspection, counsel whether you should ask for repairs, etc.
- Do anything that would run in conflict with the interests of the seller.
16. Paying Too Much Attention to Surface-Level Features.
Most sellers will do their best to pretty up their properties to attract buyers. For instance, they may invest in new landscaping, granite counters, and fresh paint. All things that are necessary to help stage a home.
While these surface-level improvements are undoubtedly attractive, you want to avoid getting too drawn in. Other home components are likely to cost you big money if they are not in good condition. These can be hidden costs you’re not thinking about.
You should list the components that need to be in good working order for the home to be livable—like the roof, plumbing, electrical, and HVAC systems.
Find out how much life is left in all the crucial components so you can clearly understand what financial burdens you will face in the next few years after you buy the home.
They can quickly drain your savings after purchasing a property if you’re not careful.
17. Not Putting The Right Contingencies in The Offer.
Getting the contract written and signed is often hectic and stressful, especially when competing with other buyers in a hot market.
Unfortunately, the confusion you may experience during the contract process could make you forget to put contingencies in that are important to you.
For instance, if you are buying a home that is being rented out, you need to put a contingency in the contract that the renters will be moved out before you get the house—if you want it empty.
Otherwise, there is a good chance that the renters will still be there.
Please talk with your agent about any contingencies they think you should consider, and make sure they are in writing before you close the home.
18. Failing to Take Responsibility For The Purchase.
You must rely on others to purchase a home—including your agent, lender, inspector, etc. But ultimately, the outcome is in your hands.
All these people will hopefully try to do their jobs as best they can, but they are only human and can make mistakes.
You will be the final word and the one to authorize the money transfer to the seller. That means the ultimate responsibility falls on you.
While you can and will feel overwhelmed, you can also be empowered during this process. Yes, you can make mistakes too. You can miss things.
But even if you miss something that later annoys you, the fact is that you still managed to buy your first home. Enjoy what you have accomplished, and feel a little pride.
19. Not Acting Soon Enough
Over the years, I have experienced far too many buyers who don’t pull the trigger quickly enough. They view a home online they love and don’t act on it.
Patience is not a virtue when it’s a robust seller’s market. If your impulse says the home won’t last, you’re probably right. Sometimes you need to be in a rush when purchasing homes.
This is one of the most common homebuyer mistakes. When you see a home that fits your requirements, jump on it. Undoubtedly, there will be others who will.
Just make sure you love the property.
20. Getting Overwhelmed With Buyer’s Remorse.
Rushing to bid on a house too quickly is also a problem. Every first-time buyer can do some second-guessing after they finalize their purchase. You just did something significant and will soon realize that you may not fully appreciate your new position until the dust has settled.
What if you should have bought that other home? Maybe you could have negotiated a better price? What if you hate your neighbors?
There are so many what-ifs—it is best to try and avoid going too far down the path of questioning yourself. After all, you own the home now. And you are probably going to hold it for a while.
Give yourself some time, and appreciate your home. Even if you are uncertain now, you will probably be pretty happy in the long term.
Buying a house isn’t like purchasing a pair of shoes.
21. Not Considering Moving Expenses
Another common slipup is forgetting about the significant expense of moving. When preparing for a move, it’s vital to consider the various costs. One of the most common moving expenses is hiring a professional moving company.
The cost of hiring movers can vary depending on the distance of the move, the amount of belongings being transported, and the level of service required.
Some companies also offer additional services, such as packing and unpacking, which can incur extra costs. Lastly, you should tip a mover for good service.
Another significant moving expense is packing supplies. This includes finding moving boxes, tape, bubble wrap, and other materials needed to load and transport belongings safely.
The cost of packing supplies can add up, especially for more significant moves or when fragile items need extra protection.
Even without a moving company, there are expenses related to transportation, such as renting a moving truck or hiring a storage unit. These costs can vary based on the size of the vehicle or unit needed and the duration of use.
Other everyday moving expenses include cleaning services for the old and new residence, utility setup or transfer fees, and any necessary repairs or maintenance to prepare the new home for occupancy.
Individuals and families must budget for these ordinary moving expenses to ensure a smooth and organized relocation process. Planning and obtaining quotes from different service providers can help estimate and manage these costs effectively.
22. Making Financial Mistakes Before The Closing.
You have found your dream home and are heading toward closing. What could go wrong? Lots if you are not careful. One of the biggest mortgage mistakes buyers don’t realize can impact their transaction is making a large purchase such as a car.
You do not want to do this!
You could have your mortgage approval taken away by the lender. Can you imagine months of planning to purchase a home only to have your sale fall apart?
Not a pleasant thought, right? Look at the reference on all the things not to do when buying a home. Also running up bills on your credit cards could be a foolish down fall.
A credit card should not be abused when buying a house. Put them away in a draw if you need to.
Final Thoughts
Buying a home is a big financial step in one’s life. It is easy to make mistakes if you are not careful. Ensure you find a real estate agent who will be your confidant throughout the transaction.
It should be someone you trust explicitly. The best agents always put your interests first before their own. They will not care if you buy now or next year.
Never settle for a cut-rate real estate agent. Home buying mistakes happen when an agent pressures you to make a purchase.
Additional Helpful Home Buying Resources
- What to know as a homeowner – see twenty things essential to learn when you have purchased a house, especially when it is the first time.
- What do buyer’s agents do – most people think the primary role of a real estate agent is to show houses. This is one of an agent’s least essential tasks when representing a buyer. See why a buyer’s agent is so critical.
- Home buying start to finish – look at what you need to know as a home buyer from before you begin the process until the day you move into your new house.
Look at these additional resources to be even better armed with tips as a first-time home buyer.
About the Author: Bill Gassett, a nationally recognized leader in his field, provided information on first-time home buyer mistakes to avoid. He is an expert in mortgages, financing, moving, home improvement, and general real estate.
Learn more about Bill Gassett and the publications he has been featured in. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of Metrowest towns for the last 38+ years.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
Hi Bill,
Great stuff! If every buyer had benefit of this, the entire process would be a lot smoother. And all involved would be subject to a lot less stress and failed transactions.
May I reprint for my agents and clients?
Thanks!
Yes you can reprint it. However, please ensure that my name remains on it as the author.