15 First-Time Homebuyer Mistakes and How to Avoid Them

1. Home shopping before talking to a lender

Before you begin shopping for a home, talk to a lender first to see how much home you can afford. A lender can give you a clear picture of your financial capacity, including how much you can borrow, what your monthly mortgage payments might be and what loan options you qualify for.

This process, often referred to as preapproval, provides you with a realistic budget. Buyers with a preapproval letter in hand are often considered more serious than those without one.

Preapproval vs. pre-qualification

There are two common approaches when it comes to obtaining a preliminary assessment from a lender: pre-qualification and preapproval.

For a pre-qualification, the lender will ask for your income, debts and assets and give you a rough estimate of how much you may be able to borrow. It is quick to get and gives you a ballpark figure, but it is not a guarantee of a loan or loan amount.

A preapproval looks at your finances in more depth, taking bank statements, pay stubs, tax returns and credit scores. While preapproval is not a guaranteed loan either, it does tell sellers that you have already been vetted by a lender. With a preapproval letter, you can make offers on a home. As long as nothing changes with your financial situation, the preapproval loan limits and rate should be close to the actual terms you receive.

» MORE: How to get preapproved for a mortgage

2. Not using local professionals

When moving to a new area, take time to research real estate agents that successfully sell in that area. Using local and licensed professionals can ensure that area-specific codes and laws are met. You should be able to find reviews of agents and verify how long they have lived there. It’s important to hire a licensed real estate agent with a proven track record of success.

Some cities can have complicated issues that only someone with experience living and selling in the area would know about. When searching for a real estate agent, get referrals from neighbors, family members, friends and coworkers. You can also use online directories or trusted real estate sites to find local real estate professionals with experience in the neighborhood.

3. Forgoing neighborhood research

No matter how dreamy the home listing photos look, you need to take some time to investigate the neighborhood.

Check the crime rate and look into the surrounding areas. It is also a good idea to visit the area during after-school hours or on a nice Saturday to get a feel for the community. It is a good sign if neighbors are out and about, engaging in activities or socializing.

Another important aspect to consider is the proximity to amenities and services that are important to you. Check if there are grocery stores, schools, parks, medical facilities and other conveniences within a reasonable distance. Read reviews of the local amenities and restaurants to understand how the community feels about them.

4. Forgetting future needs

Right now you might want a home with an excellent entertainment setup in the backyard and a bar room with a built-in tap, but will you still want those things in the future?

While you don’t have to consider every possible scenario when buying a home, it’s worth thinking about what your life might look like a year or five from now. Will you get married or start a family? Will a family member need to move in for additional assistance?

Ask yourself before settling on your home: Can this house grow with us? This doesn’t have to specifically relate to growing your family, either. It can mean there is enough room in the yard to discover a passion for gardening or a separate space to give remote working or starting your own business a try.

5. Waiting for the perfect home

It is also important to remember there is not a house on the market that will meet all of your wishlist items.

It is wise to keep a list of nonnegotiables you want in a home, like a two-story house, 10-foot ceilings or three bedrooms. These should be features that are too hard or costly to do during a later remodel.

But wishlist items such as granite countertops, desirable wall paint colors or curb appeal can drive up the listing price and might be more cost-effective to do yourself after you move in.

6. Not comparing lenders

Comparing lenders helps you determine which one will offer you the lowest interest rate and most favorable terms. You can do this by requesting a Loan Estimate from your top two or three lenders. There will be a small fee, usually about $30, to run your credit, but lenders are not allowed to request any other fees during this initial search period.

You don’t have to worry about your credit taking a hit by having your score pulled as long as it is all in the same 45-day window. Inquiries with different lenders will all be lumped together and reflect that you are in the process of buying a home.

7. Not researching different mortgage options

There are four mortgage loan types to choose from, and each comes with its own credit score and down payment requirements. The primary types of mortgage loans are:

• Conventional loans require a higher credit score and lower debt-to-income (DIT) ratio, but also come with more flexible terms and the option to borrow more money.
• FHA loans require private mortgage insurance (PMI), but they are a great choice for first-time buyers because they offer more flexible credit and down payment requirements. As long as your credit score is 580 or over, you can put a minimum of 3.5% down.
• VA loans are for military members and their families. These loans are backed by the Department of Veterans Affairs and allow for 100% financing, so buyers don’t need to make a down payment or have PMI.
• USDA loans are for homes in eligible rural areas and don’t require a down payment. With a USDA loan, you don’t need to buy a barn or a home with land — you can find modern homes that fall within the population guidelines set by the Department of Agriculture.

» MORE: Types of mortgage loans

8. Neglecting first-time homebuyer assistance programs

You may qualify for first-time homebuyer assistance at the federal, state or local levels that can help lower the upfront cost of purchasing a home. For example, the U.S. Department of Housing and Urban Development (HUD) offers assistance programs for first-time homebuyers in rural or suburban areas.

First-time homebuyers should also take the time to look into down payment assistance (DPA) and State Housing Finance Agency (HFA) programs. These assistance options will vary by state, but can significantly reduce the initial financial struggles of buying a home.

9. Putting 20% down

A 20% down payment is not required to buy a home. It is the requirement to avoid private mortgage insurance, which is a cost typically added to your monthly mortgage payment. Lenders require it as a layer of protection in case you default on your loan, and it will usually cost between 0.22% and 2.25% of your home cost and credit score.

Many lenders require a minimum of 3% to 10% down, depending on the type of loan. For VA and USDA loans, you are not required to have a down payment.

In some cases, making a lower down payment and paying PMI will put you in a better position financially than paying the full 20%. You don’t want to wipe out all of your savings just for a down payment.

10. Skipping the home inspection

It can be tempting to want to forgo the home inspection, especially since it can add on another $400 to $500. But even if the home looks immaculate, you should still get a home inspection because it can potentially save you thousands of dollars later on.

“It is supremely important for an inexperienced homebuyer to obtain an inspection on the largest purchase of your life thus far,” said Boris Sanchez, real estate investor and the founder of Sanmore Investments in Houston. “Do not get swayed by the market, realtor or seller. Alternatively, what is found in the inspection report can be used as a renegotiation tool.”

11. Failing to thoroughly review seller disclosures

Sellers are legally required to disclose in writing information about any known issues that could affect the value or safety of the home they are selling. This document is meant to protect both the buyer and the seller from lawsuits down the road.

Seller disclosures will typically include structural or mechanical problems with the home, notable property history and past renovations. When reviewing the seller disclosure documents, be on the lookout for mentions of unpermitted work or renovations, HOA issues, foundational problems or prior water damage.

12. Overlooking hidden costs

The listing price of a home is not the only cost you will pay. In fact, the additional fees during the process and after you buy the home can be a bit of a shock. When you go forward with a mortgage loan, you can expect to pay between 2% and 5% in closing costs and additional fees alongside your down payment.

After you own the home, you will need to pay annual property taxes and home insurance premiums, which can vary by state and home. Some homes have a homeowners association (HOA) fee, which covers the maintenance and amenities of the community.

Additionally, you should budget for ongoing maintenance and repairs, such as landscaping, utilities and unforeseen expenses.

13. Buying more house than you can afford

In a 2024 survey, ConsumerAffairs found that 69% of the homeowners we polled felt house poor. House poor refers to homeowners having little left for savings after paying the mortgage and related home costs.

The best way to avoid buying more home than you can afford is to not shop for a home at the maximum loan limits your lender sets. If you are buying a home with a partner, ideally, the monthly mortgage bill won’t rely on both of your incomes, just in case there are any unexpected changes in employment.

14. Forgetting to check your credit report early in the process

It’s a good financial habit to check your credit report every few months, especially if you’re thinking about buying your first home. Checking your credit report early in the homebuying process can help you avoid any issues when applying for a mortgage loan.

You can access free credit reports from TransUnion, Experian and Equifax on a weekly basis through AnnualCreditReport.com. When reviewing your credit report, look for errors like incorrect balances or closed accounts that are reported as open. If you notice a mistake on your credit report, you can dispute it and the credit bureau is required to investigate it within 30 to 45 days.

» MORE: What affects your credit score?

15. Not building an emergency fund for homeownership costs

Homeownership comes with a slew of costs, both routine and unexpected. While your main focus may be on covering the down payment, you should also begin budgeting for an emergency fund to pay for homeownership costs.

Some of the most common costs of owning a home include things like HVAC repairs, appliance failures or replacements and insurance deductibles. Aim to have between three and six months of living expenses set aside as emergency funds in the event of an unexpected repair, replacement or renovation.

FAQ

Bottom line

Homebuying can be a roller coaster of an experience, but once you have your keys in hand, it will feel worth it to have a property you can call your own.

Remember these common first-time homebuying mistakes and know that you have the option to switch real estate agents and lenders if you don’t like working with your first choice.