Young Asian American Woman Buying First Home

13 Common First-Time Home Buyer Mistakes

Carey Chesney10 minute read
October 15, 2021

So, you’re done throwing that money away to the monthly rent bill and now you’re investing it on your very first home. Exciting times! Buying your first home usually comes with a ton of emotions like excitement, joy and maybe a little anxiety.

It can be a rewarding process as you find your perfect (or good enough for now) home. That said, there are pitfalls to be aware of. Understanding some common first-time home buyer mistakes and how to avoid them can go a long way in diminishing the anxiety and turning up the joy.

There’s a lot to consider. Each first-time home buyer faces challenges that are uniquely their own, but there are some common first-time home buyer mistakes we will share here so you can tackle them head-on and increase your chances of success.

1. Waiting For Spring

Ah, the allure of spring! Signs of rebirth and rejuvenation abound as your world gets a little greener and all the plans subdued by winter seem possible again. It can be a common time for potential first-time home buyers to start searching again, with the promise of a vibrant spring real estate market ringing in their ears.

Well, that’s actually one of the key drawbacks when it comes to buying in spring: Competition.

There are only so many houses out there to buy and the more people that are looking, the more likely you are to get into a situation where you are competing with other buyers for a home. That means the price will go up and the likelihood of your offer getting accepted will go down. The season you buy in may be determined by other factors (getting kids into the right school for the fall, unforeseen financial and family events, etc.) but from a strictly strategic perspective, buying a house in the winter is worth strong consideration.

In addition to less competition for houses and lower prices, there are also potential tax perks: First-time homeowners may be able to deduct interest paid on a mortgage if the loan is used to buy or improve a first or second home (consult a tax professional to confirm eligibility). That means you may potentially see returns on an entire year’s worth of mortgage interest if you close in January. Score!

2. Thinking Your Mortgage Is Your Only Expense

Another common first-time home buyer mistake begins with the calculation of what it will cost monthly to go from renting to owning a home. First-time home buyers may anticipate paying only a mortgage, and when comparing that to their current rent, the savings can seem substantial. This can be a costly mistake, as there are a number of other costs they might be overlooking.

Here are a few questions you can ask yourself to make sure you are avoiding this common first-time home buyer mistake: Have you saved enough cash for closing costs or a down payment? Have you budgeted for recurring expenses like property taxes? Does your monthly budget have enough space to account for home maintenance (roughly 1% of the value of your home per year)?

Run the numbers carefully to make sure you can afford the life you want in the home you want. Before you make an offer, add up everything from utilities to groceries to make sure your expected cost of living fits in your budget.

3. Buying Beyond Your Budget

Continuing with this theme, many first-time home buyers might not know how much of a home they can afford when they start searching. It’s fun to look at houses in person and online, and a common first-time home buyer mistake is to go straight to your dream home when the “shopping” begins. This can be discouraging though, when you realize that dream home is not financially attainable, at least not yet.

Also, your lender may preapprove you for a certain loan amount, but it might not make sense to go quite that high. Again, crunch the numbers of your entire monthly budget before signing on the dotted line. Keep in mind that, while usually people think bigger is better when it comes to houses, with extra square footage comes the extra costs of furnishing, heating and cooling it as well. Those costs can add up fast. There’s nothing worse than buying a home and then realizing that you only have the resources to furnish half of it. Find a size that suits your needs – and your wallet.

4. Not Hiring A Real Estate Agent

With information about literally everything at our fingertips these days, home buyers can be tempted to buy without a real estate agent, thinking they can figure it out on their own. This is a common first-time home buyer mistake. It takes extensive experience to navigate all the paperwork, negotiations and ins and outs of a real estate transaction.

Bringing in a real estate expert who you can trust is key when it comes to your first home purchase. Your real estate agent will assist you in figuring out your finances and help you score the best price on a home. In addition, they have the necessary relationships with listing agents (those representing sellers) to increase your chances of getting your offer accepted. They might even know about off market properties you could never find on your own.

Best of all, there’s no charge until you close. Even then, the seller usually pays your agent’s commission, so there is often no cost to you to utilize a professional. With so much on the line, it pays to have an expert on your side.

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5. Not Considering The Neighborhood

You’ve likely been thinking about how many bathrooms and bedrooms you need, your target total square footage and a multitude of other factors that will help inform the search for your next home. Beyond the house stats lies an equally, if not more, important factor: The neighborhood your new abode is nestled in. Comprehensive neighborhood research is critical to a home search that ends well. After all, finding your dream home doesn't amount to a whole lot if its location is more of a nightmare.

A common first-time home buyer mistake is failing to determine the right kind of neighborhood for their needs. Pay close attention to the pros and cons of the surrounding area, and whether the area is trending up or down. Homes with blossoming downtown areas or new venues opening nearby are likely to rise in value, whereas homes within earshot of the freeway or passing trains are more likely to decline or stagnate. When looking at homes for sale, be sure to consider what will affect a home’s future price tag beyond its four walls.

6. Not Getting Preapproved

Getting a mortgage preapproval from a lender may seem like a lengthy and financially intrusive process to first-time home buyers, but it’s really not. If you are feeling that apprehension, do the research about how and why to get it done and you will quickly realize the process can be relatively painless and efficient, as well as essential. As previously mentioned, understanding what you can afford and how that fits into your monthly budget is a critical part of avoiding the common first-time home buyer mistake of getting in over your head financially.

In addition, you will need a preapproval letter from your lender when you make an offer on a home. This shows the seller’s that you will actually make it to the closing table and get the deal done. Getting all excited when you find that perfect home, only to be disappointed when you don't have that preapproval letter ready and can't make an offer, is no fun at all.

7. Waiving The Home Inspection Contingency

First-time home buyers may be tempted to bypass the home inspection as they look for ways to make their offer on a home as attractive as possible. This can be even more common in a seller’s market: A real estate market where inventory is low, prices and buyer demand are high, and sellers have most of the leverage in a transaction. Bottom line when it comes to waiving your inspection contingency: Don't do it. There are a litany of ways to make your offer as attractive as possible without forgoing this critical step. The home inspection allows you to see if there are any large expensive repairs that need to be done, giving you the opportunity to negotiate with the sellers to get them done or to get money for them at closing. If you don't do the inspection, you may be left with some big-ticket, budget-busting expenses right after you complete the purchase.

8. Opening New Lines Of Credit

When you get preapproved for a mortgage, a complete financial picture is needed for your lender to make sure you are preapproved for an amount that you can actually afford when you complete the purchase of your first home. One common first-time home buyer mistake is clouding this financial picture by taking out new lines of credit during the home search or purchasing process. This changes the equation in terms of what you can afford and what amount you can be approved for when it comes to your mortgage. Stay focused on the home search and stay away from those car dealerships for now.

9. Not Looking At All Your Home Loan Options

Many first-time home owners are familiar with a traditional, conventional mortgage where they usually will put 20 percent of the total cost of the home down as a down payment and then get a loan for the rest that they need to pay off over 15 or 30 years. However, a common first-time home buyer mistake is thinking this is the only option available to them. This is only the tip of the iceberg when it comes to financing options. Be sure to research all the various types of home loans, discuss them with your lender, and choose the one that’s just right for you.

10. Not Building Up Your Credit

Speaking of that home loan, the better your credit, the better the terms will be. This affects everything from the amount you are approved for to the interest you will pay over the course of the loan, among other things. A common first-time home buyer mistake is not working on fortifying their credit before applying for their mortgage.

Make sure to understand what credit score you need to buy a house right at the beginning and then work to achieve that score or better before diving into the preapproval process and home hunt. There are a number of different credit repair services online, but talk to your lender first, as they can serve as someone you trust who can point you in the right direction.

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11. Trying To Time The Market

Another common first-time home buyer mistake is trying to time the housing market. This may seem like a good idea, but predicting the future of the housing market might be futile and prevent you from buying that first home and building equity. The fluctuation from year to year and month to month can be an enticing variable to try to exploit, but the historical rising values of homes has been a constant force for many decades.

Investing in your first home is something to do when you are ready, not when you think the market is ready. Why? As long as you plan on being in the home you buy for at least 3 – 5 years, the value will almost certainly be there. Don't let waiting for what you perceive to be the perfect time to buy market wise stop you from taking the plunge as soon as you are personally and financially ready.

12. Missing Out On First-Time Home Buyer Programs

Overlooking first-time home buyer programs and grants is an incredibly common first-time home buyer mistake and could cost you a pretty penny. These resources can essentially be broken up into two categories: grants to help with a down payment or closing costs and programs that give you an actual discount on the property or loan. Maybe you can afford a mortgage but can’t get a down payment together. Or you’ve got enough for a down payment but not a penny more for closing costs. First-time home buyer programs are here to help with problems just like these so do the research and don't leave money on the table. A great place to start looking for help available where you live is the Department of Housing and Urban Development (HUD)’s website.

13. Not Asking Questions

This is your first time buying a home, so the learning curve is likely pretty steep. That means you need to ask a lot of questions. Questions to your real estate agent, questions to your lender, and questions to every other professional you come into contact with during the home buying process.

A common first-time home buyer mistake is not asking questions for fear of coming off like they don't know what they are doing. Any good professional will understand that the processes are complicated for those who don't deal with them everyday and accommodate any questions you may have, even if you have to ask them a few times to make sure you understand. Even without the fear of embarrassment, sometimes the problem can be not knowing the right quests to ask. Here are a few common ones to consider:

  • Questions for your real estate agent:
    • What is the best way to search for homes?
    • How can we best communicate during the process?
    • What happens after I make an offer?
    • What is a backup offer and should I consider making one?
    • What are the steps for the inspection?
    • What is the timeline for the various contingencies (inspection, appraisal, financing, etc.)?
    • What do I need to bring to the closing table?

  • Questions for your lender:
    • What mortgage options are available to me?
    • How can I raise my credit score?
    • How much money do I need for a down payment?
    • What will my interest rate be?
    • How long will the term of my mortgage be?
    • What other loan closing costs should I be aware of?

The Bottom Line: Beware These Home Buying Mistakes

When it comes to buying your first home, the opportunities for financial and personal independence and reward are plenty. Unfortunately, the potential to commit common first-time home buyer mistakes is plentiful too. From trying to go it alone without an agent, to trying to time the market, to not getting a clear financial picture, and many more, there are a number of pitfalls to avoid.

As always, staying informed is your best defense when it comes to these possible stumbling blocks. Use the information you’ve found here and never stop searching for more. Most of all, ask questions at every turn to make sure you have a complete understanding of the process and the best moves to make for your specific situation. Think you’re ready? Consider starting by taking our home buying quiz as you start your journey to homeownership.

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Carey Chesney

Carey Chesney brings a wealth of real estate sales and marketing experience to his buyers and sellers as they navigate highly competitive markets. Carey and his wife Ilze work together as Realtors® in Michigan.