Common Mistakes First-Time Homebuyers Make – and How to Avoid Them

Buying your first home is one of the most significant financial decisions you’ll make in your lifetime. A home is not only a place to live but also a substantial investment that, when handled correctly, can provide financial security and long-term stability. However, navigating the home-buying process can be complex, and first-time buyers often make critical mistakes that can lead to unnecessary stress, financial strain, or even a poor investment.

To help you avoid common pitfalls, here are the most frequent mistakes first-time homebuyers make — along with their causes, consequences, and how to prevent them.

Assuming You Must Have a 20% Down Payment

Many first-time homebuyers believe they need to save at least 20% of a home’s purchase price for a down payment. This misconception often causes people to delay homeownership for years or settle for a home that doesn’t meet their needs. The “20% rule” comes from the requirement that borrowers must pay private mortgage insurance (PMI) if they put down less than 20%. PMI is an additional monthly cost that protects the lender in case of default. Believing that 20% is mandatory not only may cause buyers to delay homeownership longer than necessary or miss out on opportunities, but it can also result in depleting savings that could have been used for home improvements, emergency funds, or other investments.

Many loan programs allow buyers to put down as little as 3-5%, depending on their credit and financial situation. FHA loans, VA loans (for veterans), and USDA loans (for rural properties) offer lower down payment options. While PMI adds to the monthly payment, buyers should weigh the benefits of homeownership sooner against the added cost of PMI. Also, when the equity in the home reaches a certain amount (usually 20%), PMI can be removed from the loan.

In addition, some mortgage brokers can potentially put together a primary mortgage that is 80% of the purchase amount along with a secondary mortgage (such as a HELOC) for the part of the 20% that isn't covered by a down-payment.

Consulting a mortgage professional can help determine the best approach.

Mismanaging Credit Before Closing

Some first-time buyers work hard to clean up their credit and get preapproved for a mortgage — only to make financial moves that negatively impact their credit score before closing. This could include opening new credit lines, making large purchases on credit, or taking out additional loans. Excitement about a new home can lead buyers to finance furniture, appliances, or home improvements before they officially own the home. Others may need cash and use their credit cards or open new lines of credit, unaware that this can affect their loan approval.

Lenders recheck credit before closing, and changes to your credit profile (such as higher balances or new accounts) can cause your score to drop, potentially jeopardizing loan approval or increasing your interest rate.

After preapproval, avoid making any significant financial changes until after closing. This includes avoiding new credit accounts, large purchases, and major financial commitments. If you need to make a purchase, consult with your mortgage lender before doing so.

Underestimating the True Cost of Homeownership

Many first-time buyers focus only on the mortgage payment, property taxes, and homeowner’s insurance when budgeting for a home. They often overlook additional costs such as maintenance, repairs, HOA fees, and utility bills. Buyers may be accustomed to renting, where landlords cover maintenance and repairs. As a homeowner, all these responsibilities—and their costs—fall on you as the homeowner.

Underestimating expenses can lead to financial strain, making it difficult to keep up with mortgage payments or forcing homeowners to sacrifice in other areas. Before purchasing, research and budget for all ongoing costs, including:

Regular maintenance (HVAC servicing, landscaping, plumbing repairs)
Unexpected repairs (roof replacement, foundation issues)
HOA fees (if applicable)
Utilities (which are often higher for homeowners than renters)

Unexpected expenses is another reason it is important to maintain an emergency fund. It may also be a good idea to keep a Home Equity Line of Credit open for repairs or expenses that are more than the cash you have available.

Shopping for Homes Before Getting Preapproved

Many buyers fall in love with a home before securing mortgage preapproval, only to find out they can’t afford it or that their financing isn’t in order. Excitement about house hunting often leads buyers to start looking at homes before understanding what they can afford. Some assume preapproval isn’t necessary until they’ve found a home they want.

Without preapproval, buyers risk wasting time on homes outside their budget. Worse, they might lose a home to a more prepared buyer if they haven’t secured financing.

Get preapproved for a mortgage before house-hunting. Preapproval not only clarifies your budget but also makes you a more competitive buyer in a seller’s market. It also helps identify any credit issues or financial hurdles that need to be addressed before purchasing.

Overextending Financially

Some first-time buyers purchase a home at the top of their budget, leaving no financial cushion for emergencies or other expenses. Buyers may qualify for a higher loan amount than they can realistically afford based on their lifestyle and other financial commitments. Stretching finances too thin can lead to financial stress, difficulty making payments, or even foreclosure if an unexpected financial hardship occurs.

Rather than simply accepting the maximum loan amount offered, buyers should create a realistic budget that accounts for living expenses, savings, and potential home repairs, as well as lifestyle expenses. A good rule of thumb is to keep total housing costs (including mortgage, taxes, insurance, and maintenance) below 30% of gross monthly income.

Skipping the Home Inspection

Some buyers, especially in competitive markets, waive home inspections to make their offers more appealing. Others believe an inspection isn’t necessary if a home appears in good condition. Waiving an inspection can make an offer more attractive to sellers, especially in multiple-offer situations. Some buyers also assume that newer homes don’t need inspections. However, skipping an inspection can lead to costly surprises later, such as hidden structural issues, faulty wiring, plumbing problems, or mold.

Always get a professional home inspection, even if the market is competitive. If sellers are reluctant, consider a pre-offer inspection to uncover major issues before making an offer. A pre-offer inspection would give the seller peace of mind that you won't back out of the deal during escrow, making your offer stronger.

Not Considering Resale Value

First-time buyers often focus on personal preferences without considering how easily the home will sell in the future. Excitement about a dream home can lead buyers to ignore potential drawbacks, such as location, layout, or features that may not appeal to future buyers. If a home has limited resale potential, it may take longer to sell or require price reductions when it’s time to move.

Think long-term and consider factors that impact resale value, such as:

Location (school district, commute times, neighborhood desirability)
Layout (avoid homes with awkward floor plans)
Market trends (buying the most expensive home in the neighborhood can limit appreciation)

Buying a Home is an Important Decision

Buying a home is an exciting milestone, but it’s crucial to avoid common mistakes that can lead to financial difficulties or regret. By educating yourself, getting preapproved, budgeting wisely, and planning for all aspects of homeownership, you can ensure a smoother and more successful home-buying experience.

By staying informed and prepared, you can make a confident and financially sound decision on your first home.

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