13 Common First-Time Home Buyer Mistakes And How To Avoid Them

For many first-time home buyers, purchasing a house fulfills a lifelong dream. However, you won’t be able to achieve this dream without having some new experiences – maybe even a few you didn’t see coming.

First-time home buyer mistakes are common, and though not always a huge deal, some can lead to unwanted process delays and additional costs down the road. Fortunately, by simply familiarizing yourself with the common mistakes of first-time home buyers, you can avoid making them.

Common First-Time Home Buyer Mistakes To Avoid

From not saving enough money to not paying enough attention to your credit, to simply waiting too long to make an offer, home buying mistakes can slow you down. Here are some of the most common home buyer mistakes and how you can steer clear of them.

1. Not Starting The Approval Process Early

Shopping for a home without initial approval – also called mortgage preapproval – can be a big mistake. Getting preapproved is the simplest and most accurate way to determine how much house you can afford. An initial approval through a mortgage lender gives you a reliable price range to stay within so you don’t set your sights too high or take on more than you can handle financially. And as a bonus, being preapproved makes you appear as a more serious buyer to sellers.

“Prequalified” or “prequalification” is another term that different mortgage lenders use. Prequalification provides a preliminary estimate of what you can afford to spend on a house, but it doesn’t typically give you the financial backing that home sellers want to see. By verifying some of your financial information, lenders can also offer preapproval.

Your initial approval doesn’t guarantee you a mortgage, but it helps you make a stronger offer. Rocket Mortgage^® can also offer Verified Approval¹– an even higher level of initial approval where we verify your credit, income and assets with the documentation you send to us.

How Can You Avoid This Mistake?

Reach out to reputable mortgage lenders and ask questions so you can find the right fit. Then apply for mortgage preapproval before you start shopping for homes. Remember to first make sure your finances are in good standing so you can receive the most accurate preapproved loan amount. 

2. Looking At Only One Mortgage Rate Quote

Getting a mortgage quote from multiple lenders will take some time, as it typically involves speaking with a professional and providing financial documentation. Although relying on the first quote you get may be time-efficient, it may not be the most cost-efficient. That’s because you may not be accessing the lowest interest rate and monthly mortgage payment available.

How Can You Avoid This Mistake?

Getting multiple quotes is the best way for a buyer to choose the right lender and secure a mortgage with the best possible loan conditions. Research reputable lenders, both online and by word-of-mouth, and compare a few before selecting one.

3. Not Working With A Real Estate Agent

Real estate agents are real estate experts. Although you may save some money by buying without a real estate agent, having a professional in your corner can ease anxiety and make the home buying process go more smoothly overall. Real estate agents know the home buying process in and out, making missteps on your part less likely.

How Can You Avoid This Mistake?

Reach out to family members or friends who’ve recently bought a home or look at online reviews to find a real estate agent who’s compatible with your home buying needs. Speak with a few agents to understand the value they’ll bring to the table. You’ll likely find that agent fees are well worth the cost.

4. Buying More Home Than You Can Afford

When a lender reviews your financial information for approval, they use your debt-to-income ratio (DTI) to determine how much of your monthly income is going toward monthly debt payments. But DTI doesn’t account for expenses such as groceries, utilities, gasoline and health insurance. As a result, it may not be wise to buy a house for the entire amount you’re preapproved for.

How Can You Avoid This Mistake?

Be sure to factor in all of your regular expenses – not just those that influence your DTI – when determining how much you can afford to spend on a monthly mortgage payment. In addition to your current budget, consider any extra costs – such as potentially more expensive utility bills – that will come with being a homeowner.

5. Not Checking Your Credit Report

Ignoring or not observing your credit score throughout the home buying process can lead to unchecked errors that could impact your loan approval or result in a less favorable interest rate or repayment term.

Although a lender will pull your credit before preapproving you, lenders will recheck it just before the scheduled closing day. Any changes in your credit report could mean changes to your loan. For example, suppose you apply for new credit cards or fail to make payments on existing credit cards leading up to closing day. Your credit score could drop significantly, possibly making it hard to qualify for financing.

How Can You Avoid This Mistake?

Monitoring your credit report and contesting any errors can help prevent credit-related delays. Also, once you’re preapproved, seek to avoid taking on new debt or missing payments on the existing debt you came in with. Any changes to your credit during the time your preapproval is effective could affect your final loan approval.

6. Waiving A Home Inspection

A home inspection can be important for avoiding future problems within the home. While some home buyers may choose to forgo an inspection to save time and money, the peace of mind an inspection can provide shouldn’t be undervalued.

A home inspection protects home buyers and lenders in the event of serious issues with the home’s structure or core systems. After the home inspection, you’ll receive a report with any identified or potential issues in the home, and you may be able to use this information to negotiate repairs or a lower purchase price with the seller.

How Can You Avoid This Mistake?

Oftentimes, the buyer’s agent will schedule a home inspection, but you can take the lead on this as the buyer. Talk with your agent about making your offer contingent on a home inspection. If you’re thinking of waiving the home inspection, be sure to speak with your agent about this possibility and its potential repercussions.

7. Spending All Of Your Savings

Buying any house typically requires cash upfront in the form of a down payment and closing costs. It’s a good idea, though, to save some money beyond the bare minimum that you’ll need to get into a house.

Draining your savings can leave you vulnerable in an emergency situation, so it’s not recommended.

How Can You Avoid This Mistake?

If you need more time to save money, you may want to push back your house hunt and build your savings. You can also speak with your lender about the possibility of making a smaller down payment, or you may decide to shop for a less expensive home. A home that doesn’t cost as much will allow you to spend less money upfront and have more left over.

8. Not Saving Up Enough Money

So how much money should you have saved to avoid coming up short both when you make a home purchase and once you start making mortgage payments each month? There are a number of expenses to save for when buying a house for the first time, including:

• Down payment
• Closing costs
• Homeowners insurance
• Property taxes
• Moving costs
• Home maintenance
• Utility bills
• Homeowners association (HOA) fees

How Can You Avoid This Mistake?

Research the average cost of buying a home based on your desired price, and ensure you have enough cash saved to cover that total and more. If the fees associated with buying a house are too expensive at the time you’re looking to buy, you may be able to make a home purchase more affordable by taking advantage of first-time home buyer programs or grants available in your area.

9. Not Making The Right Down Payment

The down payment you make on a home impacts your interest rate and the size of your monthly mortgage payments. While putting down at least 20% of the purchase price on a conventional loan is ideal, it’s not required – as long as you’re willing to pay for private mortgage insurance (PMI).

PMI is a type of mortgage insurance that protects the lender if you default on a conventional loan. It’s required until you reach 20% equity in the home. If you can afford a larger down payment, it may be worth it to avoid this additional cost. However, making a 20% down payment is simply not possible for every first-time home buyer.

How Can You Avoid This Mistake?

Make sure you’re aware of the minimum down payment for the type of loan you’re planning to finance with. It’s smart to make as large of a down payment as possible without straining your finances. You can also talk with your lender about whether you qualify for any down payment assistance programs.  

10. Neglecting First-Time Home Buyer Programs

First-time home buyer programs and grants help many people afford a home. Assistance programs vary by state and city, so check your state and local government websites to see if you qualify for additional financing.

How Can You Avoid This Mistake?

Look online for any local, state or federal programs that provide assistance for first-time home buyers. This assistance may come in the form of a grant, down payment assistance or a lower interest rate. Your lender may offer its own programs as well, so it’s important to start by speaking with your loan officer.

11. Ignoring Government-Backed Loans

When considering mortgages, many home buyers think of conventional financing, but government-backed loans may be more affordable:

• FHA loans: Insured by the Federal Housing Administration, FHA loans protect lenders in the event that a borrower defaults on their mortgage. As a result, FHA loans offer lenient credit score and down payment requirements that many first-time home buyers find attractive. On the downside, you’ll be required to pay a mortgage insurance premium (MIP) for at least the first 11 years of your loan repayment term.
• VA loans: VA loans are mortgages available exclusively to qualifying veterans, active-duty service members, members of the Reserves and National Guard, and surviving spouses. These loans are backed by the Department of Veterans Affairs (VA), which minimizes the lender’s risk when approving a borrower and allows the VA to offer loans to those who need a mortgage with more lenient financial requirements. Among the benefits of a VA loan is the opportunity to buy a home with 0% down.
• USDA loans: USDA loans, which likewise allow for zero down, are backed by the U.S. Department of Agriculture (USDA) and can make purchasing a home in rural areas more affordable. Rocket Mortgage^® is currently not accepting USDA loan applications.

How Can You Avoid This Mistake?

You might qualify for a mortgage type you’ve never considered before, so it’s worth exploring your options beyond a conventional loan. Your loan officer can walk you through the loan programs you might qualify for.

12. Not Researching The Neighborhood

While the most important consideration for many home buyers is the house itself, researching the neighborhood where the home is located is also important. If the neighborhood and surrounding area aren’t the right fit, it might be hard to enjoy your new home.

How Can You Avoid This Mistake?

To avoid this, we recommend taking the time to research the home’s neighborhood before committing to a sale. You may want to check crime statistics and consider proximity to restaurants and entertainment venues. It’s also helpful, before making a long-term commitment, to actually visit the area so you can get a feel for what it’s like to live there.

13. Making Emotional Decisions

Although emotions can play a role in whether you decide to purchase a particular house, buying a home also affects your finances. With any financial investment, it’s important to make decisions based primarily on fact and not emotion. Remember that this isn’t just a house – it’s likely one of the largest investments you’ll ever make.

How Can You Avoid This Mistake?

Lean on the expertise and guidance of your real estate agent, who should be working in your best interests both personally and financially. Your agent can make sure you’re not overpaying for a house or overlooking major, expensive issues that could risk your investment.

Additional Tips For Avoiding Common Home Buying Mistakes

Some research and planning can help you avoid almost any home buying mistake as well as unanticipated bumps in the road. Here are some additional tips to help you deal with potential obstacles:

• Utilize the professionals. Along with your real estate agent, several other professionals in the real estate industry can be valuable resources to you on your home buying journey. Real estate attorneys, mortgage loan officers, real estate brokers and other licensed professionals have unique insights you should take advantage of as you navigate through the unknowns of the buying process.
• Take a home buyer education course. Some lenders require first-time home buyers to enroll in an education course that prepares them for the mortgage process and homeownership. It’s also common for lenders to offer a financial incentive in exchange for taking a first-time buyer class.

The Bottom Line: Some First-Time Buyer Mistakes Are Preventable

You can avoid many first-time home buyer mistakes by learning from those who’ve bought a house before you. If you have trusted friends or family members who’ve recently purchased a home, ask them what they’ve learned along the way. Perhaps even more valuable is the advice of a trusted real estate agent.

Ready to take the first or next step in your home buying journey? You can start the approval process or talk with a Home Loan Expert about finding the best mortgage for your situation.

¹ Participation in the Verified Approval program is based on an underwriter’s comprehensive analysis of your credit, income, employment status, assets and debt. If new information materially changes the underwriting decision resulting in a denial of your credit request, if the loan fails to close for a reason outside of Rocket Mortgage’s control, including, but not limited to satisfactory insurance, appraisal and title report/search, or if you no longer want to proceed with the loan, your participation in the program will be discontinued. If your eligibility in the program does not change and your mortgage loan does not close due to a Rocket Mortgage error, you will receive the $1,000. Client must submit the claim to Help@RocketMortgage.com or contact Client Relations at 1-800-863-4332 to complete and return a claim form to Client Relations in order to claim the $1,000. Additional information will be required for tax purposes. This offer does not apply to new purchase loans submitted to Rocket Mortgage through a mortgage broker. Rocket Mortgage reserves the right to cancel this offer at any time. Acceptance of this offer constitutes the acceptance of these terms and conditions, which are subject to change at the sole discretion of Rocket Mortgage. Additional conditions or exclusions may apply.