6 Big Mistakes First-Time Homebuyers Make and How to Avoid Them

Buying that first house is exciting—finally, a place to call your own! But with that thrill comes the expensive realities of home ownership. Avoiding common mistakes that first-time homebuyers make can help you approach this momentous occasion as a well-planned business transaction.

First-time homebuyers may be seduced by the allure of homeownership. Finding that “perfect” house is what we all dream of, but what are the realities of owning it? Even in the most glamorous cities in the U.S, what’s affordable for some is a deal breaker for others.

Here are some of the top mistakes people make when getting ready to buy their first home.

Skipping the Mortgage Pre-Approval Process
Homebuyers who don’t understand their borrowing capacity may face disappointment in their search for a home. Without a pre-approval from a mortgage lender, many buyers waste time considering homes well beyond their budget. A pre-approval provides a clear estimate of what you can afford, helping you focus on properties within your price range. Though pre-approvals are not a guarantee of final loan approval, they demonstrate to sellers that you’re a serious buyer. This can be a valuable advantage in competitive markets.

To avoid this common mistake, be sure to get pre-approved before you begin house hunting.

Buying Bigger Than Your Budget
Mortgage lenders review your debt-to-income ratio (DTI) to see how much of your monthly income goes toward debt. This is a useful guideline, but DTI alone doesn’t factor in the extra expenses of homeownership. These additional costs often include home repairs, maintenance, property taxes, homeowner’s insurance, private mortgage insurance (PMI), utilities, municipal services, and HOA fees (if applicable). If you buy a home for the full amount you’re pre-approved for, you may find yourself with little left after the mortgage payment. This could leave you struggling with everyday expenses like groceries, gas, or small pleasures such as dining out or buying new clothes.

To avoid this mistake, add up all your monthly expenses beforehand to ensure you can afford the mortgage and still cover your other costs.

Not Working with a Real Estate Agent
Real estate agents are experts at navigating the housing market and can be invaluable resources during your home search. They provide insights on market trends, help you evaluate properties, and negotiate the best deal for you. Since sellers typically cover real estate agent fees, using a buyer’s agent doesn’t typically add extra costs (though it’s important to confirm this in the agent’s contract before signing). A good real estate agent will also help manage the complicated process of buying a home, ensuring that deadlines are met and paperwork is handled smoothly. This guidance can reduce stress and help you avoid costly mistakes.

To make your home-buying experience smoother, be sure to work with a qualified and experienced real estate professional. Their expertise will not only simplify the transaction but also give you a competitive edge in finding and purchasing the right home.

Ignoring Your Credit Report
Your credit report plays a key role in determining your eligibility for a mortgage and the terms you’ll receive. It influences interest rates, repayment terms, and the overall cost of borrowing. If you don’t check your credit report before applying for pre-approval, you could miss errors or negative marks that affect your creditworthiness.

Tip: Negative items on your credit report may lead to unfavorable changes in your mortgage terms, potentially creating issues at closing. Lenders will recheck your credit before the closing process to ensure nothing has changed.

Avoid this mistake by monitoring your credit report and dealing with any noticeable errors. Once preapproved for a mortgage, don’t take on any more debt. Don’t miss payments on the debt you already have.

Skipping the Home Inspection
A home inspection is one of the most crucial steps in buying a home, yet some buyers skip it to save a few hundred dollars. This can be a costly mistake. A thorough inspection protects both buyers and mortgage lenders by identifying potential issues with the home’s structure, HVAC systems, windows, pest infestations, and more. Catching these problems early can prevent expensive surprises down the road.

Skipping the inspection could leave you vulnerable to unforeseen repairs and costs. Instead, use the inspection report as a tool to negotiate a lower purchase price or request repairs before closing.

Avoiding Other Common First-Time Homebuyer Mistakes

Many first-time buyers make key mistakes that can lead to financial strain or missed opportunities:

• Not saving enough for a down payment:
  While 20% of the purchase price is ideal, many first-time buyers save less. However, a larger down payment can reduce your interest rate and monthly mortgage payment. Additionally, a 20% or greater down payment signals to sellers that you’re a lower-risk buyer, making your offer more attractive in a competitive market.
• Overlooking first-time homebuyer programs:
  There are countless grants and assistance programs available, which can offer substantial help with your down payment or closing costs. Take the time to research local and state government programs or ask your loan officer about what you might qualify for.
• Letting emotions drive your decisions
  It’s easy to fall in love with a home, but what you want and what you can afford may not align. Remember, this is a long-term investment, and affordability goes beyond the initial purchase—you’ll also need to maintain and care for the home in the years to come.

Many house-buying mistakes are avoidable. Make lists of what you want, need, and can live with—and without. Do your homework, don’t be swayed by first-time emotions, and use common sense. Most importantly? Be realistic.

To steer clear of common first-time homebuyer mistakes, Thompson Kane & Co. is here to guide you. Our loan officers provide personalized advice to help make your journey to homeownership as smooth as possible!

By Teri Silver

Teri Silver is a journalist and outdoor enthusiast. She and her husband live on 5 acres with a vast lawn, three gardens, a farm, a pond, many trees, and a lot of yard work! The best parts of the year are summer and fall, when home-grown veggies are on the dinner table.