Buying your first home is an exciting time, but it is also one of the most important financial decisions that many people make. These tips can help you navigate the home buying process and avoid some of the most common mistakes when you are purchasing a mortgage, looking for a home, or preparing to move.
Common mistakes when buying your first home
1. Looking for a home before applying for a mortgage
When you buy your first home, you may want to look at the home before talking to a mortgage lender. However, in today’s tough market, you don’t have a mortgage Before approval When you look at the house, it can lead to the seller not taking your offer seriously. That’s because they don’t want to take risks on people who aren’t sure the sellers won’t even get funding.
Once approved in advance, you can also consider it Lock your interest rate. Doing so will help you handle costs and reduce concerns about rate increases when making offers.
How this affects you: If your loved one has hit the market and is not consulting with the lender, you may be in a tricky situation. You can also see the houses that you don’t have room.
What should I do instead: “Before you fall in love with the gorgeous dream home you’ve been paying attention to, make sure you get fully undertaken pre-approval,” says Alfredo Arteaga, loan founder of Commloan in Newport Beach, California. Pre-approved indicates that you are a serious buyer who passes the convening to ensure your credit and finances are successful.
2. Stick to a nearby house
Certainly, you want a home that checks out the items on your wish list and meets your needs. However, buying purely based on the cosmetics of your home can be myopic if you are buying in a neighborhood you disliked or inconvenient area.
Choosing the right town is important for your life and family development. The goal is to find you and your brood where the culture and values of the (area) match yours. You can always trade up and down for a new home, add a third bathroom, or renovate the basement.
– Allison Bernstein
Founder, Starter Venture
How this will affect you: You love your home, but you can hate your neighborhood.
What should I do instead?: Solve what your priorities are in the community and do your homework. We recommend investigating school ratings, commute times and other factors depending on your needs and preferences. You can visit your neighborhood at different times to get a sense of traffic flow and see if it’s an area that appeals to you. A suitable neighborhood At least at first, it’s a more important fit than a proper home. You can improve the properties, but changing areas will be slower.
3. I’m waiting for the unicorn
Unicorns are mythical creatures of nature and real estate. One of the most common first-time home buyer mistakes is looking for a home to check each box. Search for Perfect allows you to narrow down your options and pass the appropriate options Starter Home Hopefully something better comes. James Dustis, a real estate broker with a compass in Chicago, should not interfere with your search.
How this will affect you: Finding that dream home may limit your real estate search. Furthermore, doing so can lead to missed opportunities and overpaying the home.
What should I do instead?“We are accused of New York City,” said Ralph Dibgunara, president of Home. He notes that there is a loan program that allows you to involve repairs and renovation costs into your mortgage.
4. Make decisions based on emotions
Choosing your first home is not just a financial decision, but it is often an emotional decision as well. It’s natural that you have high hopes and dreams about the home you buy and build yourself. The key is to avoid discouraging those feelings from being practical in terms of your budget and long-term goals. Budget should be one of the key factors that inform your purchase decision.
How this will affect you:Emotional decisions can lead to overpaying the home and leading to stretching yourself beyond your financial means.
What should I do instead?: “I have a budget and I stick to it,” says Dibhgunara. “Don’t be emotionally attached to a house that’s not yours.”
5. The lender speaks to only one person
Shopping with multiple mortgage lenders is a common step that is often overlooked in the home buying process, especially for first-time buyers. However, skipping this process is expensive. Comparing offers from different lenders will give you the most competitive rates and loan terms. Even a small difference in interest rates amounts to thousands of dollars saved over the loan term.
How this will affect you:You’re more Shoppinga better basis for comparison is that you need to ensure you get a significant amount and the lowest possible rate.
What should I do instead?See at least three different lenders: Rates change frequently, so aim to get a rate estimate on the same day. Compare rates, lender fees, and loan terms. Don’t discount customer service and lender responsiveness, as both play an important role in running the mortgage approval process smoothly. Bank Rate Mortgage fee list A great place to start a comparison shopping.
6. Paying careless in the credits
Your credit score is an important part of realizing your homeownership dream. Mortgage lenders will check your credit report when you apply for pre-approval for your mortgage and make sure your financial profile will not change so that it will affect your ability to pay off your loan once more before closing it again.
How this will affect you:As a first-time home buyer, the important thing to know is that your new credit report loan or credit card account can risk termination and final loan approval. Buyers, especially first-timers, often learn this lesson the difficult way.
What should I do instead?: From pre-authorization to deadlines, avoid making major financial changes, such as opening a new credit card, closing an existing account, or making large purchases with an existing credit account. If possible, repay your existing balance to less than 30% of the available credit limit, paying the hour and full monthly amount.
7. Overlooking FHA, VA, USDA loans
A hopeful first-time buyer may find it difficult to save a down payment at a current market home. If you have little storage for a down payment or if your credits are not good, Traditional loans.
How this will affect you: You may delay searching your home, assuming you have no funding options.
What should I do instead?: Examining one of three government insurance loan programs supported by the Federal Housing Administration (FHA Loans), the U.S. Veterans Affairs (VA Loans), and the US Department of Agriculture (USDA Loans). Here’s a brief overview of each:
- FHA loan A minimum credit score of 580 requires just 3.5% down. If your credit score disqualifies you from a traditional loan, I had a loan It could be a viable alternative. This loan allows for a score as low as 500 and can be reduced by 10%. The main drawback of these loans is mandatory mortgage insurance, which is paid annually and upfront when closed.
- VA loan Only qualified active duty and veteran military members and their spouses. Although these loans do not have down payment requirements, some borrowers may pay financing fees. Provided by a private lender VA loan And there is a lending fee cap to keep borrowing costs affordable.
- USDA loan Help moderate to low-income borrowers buy rural homes. You must purchase a home in a USDA-qualified area and qualify by meeting certain income restrictions. Like VA loans, USDA loans do not require a down payment.
8. Too fast
Buying a house can be a complicated process, especially when you enter weeds of Mortgage underwriting. Nick Bush, full-time real estate agent at Exp Realty and founder of Cobi Company, says rushing the process can cost you later. “The biggest mistake I’m seeing is not planning enough before purchasing,” Bush says.
How this will affect you: Rapidling the process means that you may not be able to save enough due to the down payment; Closure costs. It also means that you may not have enough time to address the issue of credit reporting, which can prevent you from securing more favorable loan terms.
What should I do instead?: Map your timeline to buy your home at least a year ago. Keep in mind that it takes months, and even years, to repair inadequate credit and save enough for your down payment. Focus on improving your credit score, paying off your debts, and saving your down payment. That way you will be in the strongest possible position to be approved in advance.
9. Buy more houses than you can afford
Stretching your budget to buy a house you fall in love is another first-time home buyer mistake to avoid. With high home prices and mortgage rates, it is especially important to get closer to your budget and not over-expand.
How this will affect you: Buying a house even a small amount on a budget increases the risk of foreclosure if you experience financial difficulties such as job losses or serious illness. High mortgage payments mean less room for monthly budgets for other invoices and expenses. There’sThe poor family“Other opportunities can also be focused, such as funding your retirement account, a child’s education fund, and saving on holidays.
What should I do instead?: Rather than pinning it to the maximum eligible loan amount, focus on monthly payments. Just because you are eligible for a $300,000 loan doesn’t mean you’ll be able to comfortably handle the monthly payments that come with it. Factorize your entire financial profile when making a decision A home where you can afford.
10. Emit savings
Ed Connarchee, branch manager for Guild Mortgages in Gurney, Illinois, said spending all or most of the down payment and closing costs is one of the biggest mistakes for first-time home buyers.
Some people don’t have to pay mortgage insurance because they cut all their money together and pay a 20% down payment, but they’re still leaving no savings, so they’re choosing the wrong poison.
– Ed Conalkey
Branch Manager for Guild Mortgage
How this will affect you: Home buyers who have reduced 20% or more will not have to pay Private Mortgage Insurance (PMI) When taking out a traditional mortgage. It usually leads to significant savings on monthly mortgage payments, but the risk of living on the edge is not worth it, Connarchee says.
What should I do instead?: Aim to earn 3-6 months of living expenses even after closing 3-6 months of living expenses with the Emergency Fund. Mortgage insurance payments are not ideal, but draining emergency or retirement savings to create a massive down payment is a risk to avoid. Also, once you have achieved 80% capital at home, you can remove your PMI with a traditional loan.
11. Assume you need a 20% down payment
The long-standing belief that you have to lower 20% is (often) a myth. 20% down payment It helps you avoid mortgage insurance. Many buyers today don’t want to (or can’t) spend that much money. In fact, according to the National Association of Realtors, the typical down payment for first-time buyers in 2024 was 9%. Some communities, such as cooperatives and condominiums, may require a larger down payment, so check with your real estate agent about the requirements of your particular community and their budget accordingly.
How this will affect you: It may take several years to delay your home buying to save 20%. It could also limit your ability to achieve other financial goals, such as maximizing retirement savings, adding to emergency funds, and repaying high-profit debt.
What should I do instead?: Consider other mortgage options. It can only drop by 3% over traditional mortgages. An FHA loan only requires a 3.5% drop if your credit score is 580 or higher. Using other types of loans may even allow you to secure a mortgage without a down payment.
12. I’m missing out on my support program
Before you buy a home, explore your first HomeBuyer program to see if you are eligible for assistance. These types of programs are generally offered at federal, state and local levels, but sometimes lenders offer discounts to first-time users. For example, states operate Housing Finance Bureaus and offer programs that provide down payments and cost assistance for closings.
How this will affect you: Skip your first HomeBuyer Assistance program investigation and you may be paying more for down payments or closure fees than you need. Alternatively, you can miss out on the loan with favorable terms for first-time users.
What should I do instead?: Check local, state and federal housing authorities websites to find out which loans and grants are available to first-time home buyers.
13. I don’t line up gift money
Do you rely on your family and friends to help you make a down payment for your home purchase? If so, it is important to fully establish such financial details before applying for a mortgage. Otherwise, it could hinder the approval process.
How this will affect you“We’ve seen you get a lot of money,” said Dana Scanlon, real estate agent at Keller Williams Capital Properties in Bethesda, Maryland. “If buyers ratify a contract to buy a house, knowing that they will get gift money, and the gift money doesn’t come true, they could lose them Serious money deposits. ”
What should I do instead?: If someone gives gift money for a down payment, discuss how much they want to give and when you can expect to get it. Make a check or copy of an electronic transfer that shows you how the money took your hand from the gift donor. Lenders often request gift letters to confirm funds and their sources, so be prepared to provide them if asked.
14. Don’t negotiate home buyer rebates
Many first-time buyers are unfamiliar with the concept of homebuyers’ rebates, also known as committee rebates. These rebates are up to 1% of the selling price of a home and could come from a committee of buyer agents, according to Ben Mizes, co-founder and president of St. Louis’ Clever Real Estate.
How this will affect you: HomeBuyer rebates are available in most US states, but not all. Currently, eight states are banning home buyers rebates: Alabama (certain types only), Alaska, Kansas, Mississippi, Missouri, Oklahoma, Oregon and Tennessee.
What should I do instead?: If you live in a state that allows homebuyers to rebate, check if your agent is willing to provide it when it closes. With a $400,000 home purchase, this could amount to a $4,000 savings.
15. Ignore travel and other advance fees
Once the home sale is over, the next step is to prepare for your journey. For many, it involves paying for a mover unless you plan to transport your belongings yourself. According to Angi, the average cost of a professional mover ranges from around $800 to over $2,500. Taking money for the necessary renovation or repairs is another important consideration for your budget.
How this will affect you: If you forget to include travel costs – you can add up just by purchasing packaging supplies, but it can lead to rewarding financial situations. Plus, not spending money on even minor renovations and updates can make a difference in the comfort of the new home.
What should I do instead?: Learn about cutting edge travel costs and budgets. If you are planning a renovation or repair, price everything from the cost of building materials and products to actual construction. Try to get as many work estimates as possible from the contractor in advance.
16. Overlooking the hidden costs of homeownership
One of the most important things to know as a first-time home buyer is that owning a home is more expensive than you think. Beyond your monthly principal and interest payments, there are other expenses in which you can add up to your home, such as property taxes, homeowner/hazard insurance, and utilities. Plus, don’t forget about general maintenance and maintenance costs, hidden costs such as pest prevention and smoke alarm batteries replacement.
How this will affect you: All said, you could end up paying thousands of taxes, insurance and maintenance costs a year. Without sufficient cushioning in your monthly budget or emergency funds to cover these costs, you could quickly put a strain on your finances.
What should I do instead?: Your real estate agent or lender will help you calculate the number of tax, insurance and utility bills. To compare estimates, I shop for insurance coverage. Finally, we aim to secure at least 1% to 3% of the home’s purchase price each year for repairs and maintenance costs.
Next steps for first-time home buyers
Keeping these first-time home viewing mistakes in mind will help you start making progress with the right steps. Check it out if you’d like more beginner advice First Home Buyer Guide And our discussion of who can do it Qualification as a first-time home buyer.
