Between navigating mortgages, handling negotiations, and managing the emotional ups and downs of house hunting, even prepared buyers can stumble into expensive pitfalls that cost thousands of dollars.
This article will reveal the 13 most common first-time homebuyer mistakes and show you exactly how to avoid each one, so you can purchase your dream home with confidence and more money in your pocket.
13 Common First-Time Home Buyer Mistakes
If you can make it through the homebuying process with this list of common mistakes in mind, you'll be in great shape!
1. Not Checking Your Credit Score
Your credit score directly impacts both your mortgage approval odds and the interest rate you'll pay—potentially costing or saving you tens of thousands over your loan's lifetime. A score difference of just 100 points can mean paying an extra $200+ per month on a typical mortgage.
Check your credit score before you start house hunting, not after you find your dream home. This gives you time to dispute errors, pay down balances, or address other issues that could boost your credit score. Even a modest 50-point improvement could qualify you for better loan terms and save you money over 30 years.
2. Failing To Get Pre-Approved
A mortgage pre-approval letter states that you appear to meet the minimum eligibility requirements for a home loan of up to a certain amount. Having this letter in hand makes you a more appealing buyer.
While a pre-approval doesn't guarantee you'll secure the loan, it generally provides enough reassurance to a seller that you're making a strong offer on their property with a good chance of closing. Plus, some real estate agents only work with pre-approved buyers because they don't want to waste their time representing someone who can't qualify for a mortgage.
3. Overestimating What You Can Afford
Your pre-approval letter might say you can afford a $500,000 home, and the monthly payments may seem affordable. However, depending on your income and cash reserves, you could be one emergency away from defaulting on your mortgage.
"It's not uncommon for someone to be approved for a loan that has a higher monthly payment than they can reasonably afford. If someone takes on a payment that makes their budget too tight, it could ultimately cost them their home," warns Anthony Kirlew, real estate agent at EXP Realty.
"They may start to struggle with their mortgage payments and fall behind because of other unexpected expenses," adds Kirlew.
4. Not Comparing Mortgage Lenders
Shopping around for your mortgage isn't just smart—it's essential. Even a small difference in interest rates can cost you tens of thousands over your loan's lifetime, yet many first-time buyers simply go with the first lender they contact.
Consider this: on a $420,000 mortgage, the difference between a 6.5% and 7% interest rate equals $50,000 in extra interest over 30 years. That's enough for a luxury car or significant home improvements, money that stays in your pocket simply by comparing offers.
Don't stop at rate shopping—negotiate your mortgage terms. Lenders often have flexibility on rates and fees, especially if you have strong credit, multiple offers to leverage, or you're shopping during slower market periods.
5. Skipping First-Time Homebuyer Assistance Programs
First-time homebuyer assistance programs can help you cover your down payment, closing costs, and other expenses related to homeownership. These programs are offered at the state and local levels and could involve low-interest loans or grants you don't have to repay.
Kirlew points out, "If someone hasn't bought a home in a long time, they should act as if they are buying for the first time. There are first-time buyer incentives that a homebuyer can qualify for if enough time has passed since they owned a home, or if they previously owned in another state."
6. Draining Your Savings For The Down Payment
You may have heard you must make a 20% down payment to qualify for a mortgage. While a larger down payment can help you secure a better interest rate, avoid mortgage insurance, and build equity faster, it's not required.
You can get a home loan with as little as 3.5% down through FHA loans, and some programs like VA loans require no down payment at all.
Don't empty your savings account for a bigger down payment. Here's why maintaining your cash reserves is more important:
- Emergency expenses: Unexpected medical bills, car repairs, or appliance replacements can happen at any time.
- Job security: Having 3-6 months of expenses saved protects you if you lose income unexpectedly.
- Home repairs: Major issues like roof damage, HVAC problems, or plumbing emergencies can cost thousands.
- Retirement planning: Money removed from retirement accounts loses years of potential compound growth.
7. Forgetting About Additional Costs
The purchase price is just the beginning—homeownership comes with numerous upfront and ongoing expenses that can catch first-time buyers off guard. Beyond your down payment, you'll face closing costs that typically range from 2-5% of your home's purchase price.
Once you own the home, expect these ongoing monthly and annual expenses:
- Property taxes: Annual taxes based on your home's assessed value, often paid monthly through escrow.
- Homeowner's insurance: Required by lenders to protect against fire, theft, and other damages.
- Maintenance and repairs: Budget 1-3% of your home's value annually for upkeep and unexpected issues.
- Mortgage insurance: Required if you put down less than 20%, adding $200-300+ monthly on most loans.
- HOA fees: Monthly or annual fees if your property is part of a homeowners association.
Pro tip: Factor these costs into your budget before making an offer, and maintain cash reserves after closing to handle the inevitable expenses that come with homeownership.
8. Making Emotional Decisions
Buying a home can be an emotional experience. You may lose a bidding war for the home of your dreams, have ten offers rejected, or learn the property you want has a costly structural issue that's not worth repairing.
The process can wear on you—especially if it takes a long time. Once that happens, you may be more likely to make emotional decisions instead of rational ones. These decisions could cause you to buy a house you don't want or overpay for a property just to "get it over with."
9. Skipping The Home Inspection
A professional home inspection is your best defense against buying someone else's expensive problems. The inspector will identify structural issues, electrical problems, plumbing defects, and other costly repairs that aren't visible during your walkthrough.
Skipping this $300-600 investment could cost you tens of thousands later. Hidden issues like foundation cracks, faulty wiring, or roof damage can turn your dream home into a financial nightmare. Even if the inspection reveals problems, you can negotiate with the seller to fix them or reduce the purchase price accordingly.
10. Not Researching The Neighborhood
Everything about your potential new home is perfect—from the granite countertops to the fenced-in backyard, the property has it all. But have you researched the area, walked through the neighborhood, or driven around the block at different times of the day?
If not, you may have missed that the local elementary school has a poor rating (and you have two young kids), your side of town has a high crime rate, or your soon-to-be neighbors play loud music late at night. Without this intel, you could buy a home that doesn't work for you and your family.
11. Not Educating Yourself About The Process
The homebuying process involves complex financial decisions, legal contracts, and timing-sensitive deadlines—what you don't know can cost you dearly. Without a solid understanding of mortgages, negotiations, and closing procedures, you're more likely to make decisions you'll regret.
Start building your knowledge before you tour your first house. Create a first-time homebuyer checklist that covers mortgage pre-approval, inspection timelines, and closing requirements so you understand what to expect at each step.
"Find a trusted real estate agent and mortgage lender and have them each walk you through the process from A to Z (from each different perspective). Then, make sure to ask any questions or for clarity on anything unclear. There's no 'stupid' question, and a professional will never make you feel inferior for asking a question," says Kirlew.
12. Not Hiring Or Vetting A Real Estate Agent
Your real estate agent guides you through one of life's biggest financial transactions—choosing poorly can cost you thousands. The right agent becomes your advocate, negotiator, and expert advisor.
A qualified agent provides essential services:
- Program access: Help finding first-time homebuyer assistance programs you might miss.
- Process management: Guidance from offer to closing, including inspection coordination.
- Skilled negotiation: Fighting for better prices, repairs, and closing cost credits.
- Deadline protection: Ensuring you meet contract deadlines to protect your earnest money.
"Ensure [you] don't miss any contract deadlines (of which there are usually several), which can jeopardize [your] earnest money deposit," warns Kirlew.
Pro tip: Even with an excellent agent, always review your real estate contract personally and ask questions about anything unclear.
13. Changing Your Financial Situation Before Closing
When your lender approves you for a mortgage, they do so based on your current financial circumstances. Any changes to your income, debt, or credit could jeopardize your loan approval right before closing.
According to Stephanie Amedee, branch manager at Semper Home Loans, Inc., even small financial changes can derail your mortgage.
"Missing a payment, charging excessive amounts to credit, or opening a new account could change the debt-to-income ratios used during the underwriting process or reduce your credit score, which could impact the approval of your mortgage loan," Amedee explains.
To protect your loan approval, Amedee recommends avoiding these common mistakes:
- New credit accounts: Don't open credit cards, auto loans, or other financing during the mortgage process.
- Large purchases: Avoid charging major expenses to existing credit cards.
- Student loan changes: Monitor loans in deferment that could automatically restart payments.
- Job changes: Keep your employment situation stable until after closing.
One missed payment or unexpected debt change showing up on your credit report could cost you your dream home.
Bottom Line
The 13 mistakes outlined above are completely avoidable with proper preparation and professional guidance. Improve your credit, research the process, hire qualified professionals, and maintain financial discipline throughout your home purchase.
By staying rational over emotional and keeping adequate cash reserves, you'll avoid costly pitfalls and confidently close on a home that serves you well for years to come.
Frequently Asked Questions
How much should I save before buying my first home?
Aim to save at least 3-5% for your down payment, plus 2-5% of the home's purchase price for closing costs. Additionally, keep 3-6 months of expenses in an emergency fund that you don't touch for the home purchase.
Do I really need a 20% down payment to buy a house?
No. Many first-time buyers purchase homes with much less. FHA loans require as little as 3.5% down, VA loans may require nothing down, and some conventional loans accept down payments as low as 3%. A 20% down payment helps you avoid mortgage insurance but isn't required.
How long does the home buying process typically take?
From pre-approval to closing, expect 30-60 days on average. However, finding the right home can take weeks or months depending on your local market conditions, budget, and specific requirements. Starting your preparation early gives you the best advantage.