Whenever a decision involves money, there’s a lot of pressure. Buying a house is no exception — it’s a stressful process, especially since there are a lot of moving parts and significant financial repercussions if you make a mistake.

To help you navigate the hurdles and potentially save some serious cash, I’ve outlined nine common mistakes to avoid when buying your future humble abode.

1. Underestimating closing costs and the price of homeownership

9 First-Time Home Buying Mistakes You Should Avoid Making - Underestimating closing costs

You checked your credit report and secured preapproval for a mortgage. You scouted various neighborhoods and found a reasonably priced house that meets your preferences and needs. You even came to an agreement on a price that’s within your budget. Finally, you’re ready to sign the dotted line and become a homeowner. Not so fast.

The purchase price is far from the final total you’re responsible for paying. Unfortunately for many people’s wallets, the money-suck doesn’t stop there — you’re still on the hook for various closing costs.

After executing your loan agreement, you’ll receive a document called a “Good Faith Estimate” that outlines your closing costs. You could have attorney fees, property appraisal fees, Homeowner Association transfer fees, home inspection fees (which, again, are worth it), property taxes, and so on to pay. Although closing costs are negotiable, the buyer is typically responsible for the majority of them.

The cost of homeownership is only beginning. Beyond your monthly loan payment, you also have to consider:

  • Utilities.
  • Repairs (especially if it’s an older home).
  • Potential improvements.
  • PMI.
  • Homeowners insurance (which is separate from PMI and required by lenders).
  • Taxes.

When you’re determining your home-purchase budget, don’t neglect these additional and ongoing expenses. 

2. Rushing the home-buying process

9 First-Time Home Buying Mistakes You Should Avoid Making - Rushing the home-buying process

Many first-time homebuyers adopt an urgent mentality. They think they need to move quickly — a sensation that amplifies when the housing market is hot. This can lead to fear of missing out (FOMO) and spur-of-the-moment decisions.

Considering the magnitude of this purchase, that would be a huge mistake.

Buying a home is not a sprint — it’s a marathon.

Cutting corners will get you in trouble. You’ll miss red flags, go over your budget, and potentially buy the wrong home.

To ensure you buy the right home, take a deliberate and meticulous approach. Outline your preferences, such as proximity to schools or the number of bathrooms. Survey multiple houses across several neighborhoods. Walk around each area to see if you could envision yourself there.

These simple steps will protect you from rushing the process.

Read more: First-Time Home Buying Guide

3. House hunting before you’re approved for a mortgage

You diligently scouted various neighborhoods, looking for your exact needs. You’ve fallen in love with your future house. You can picture yourself waking up, strolling downstairs, brewing a fresh cup of joe, and lounging on the back patio while the birds chirp above you.

Except there’s an unfortunate reality: you can’t afford this dream.

You shopped without a practical idea of how much you could afford. Now, you’re disappointed.

This is a risk you take when you house hunt before you’ve applied for a mortgage.

More likely than not, you’ll need some help from a lender to purchase a house, so it’s worth trying to get pre-qualified or preapproved. You’ll know your spending power, which can help you eliminate houses outside of your budget. 

4. Applying for a mortgage before checking your credit

9 First-Time Home Buying Mistakes You Should Avoid Making - Applying for a mortgage before checking your credit

To maximize your chances of securing a mortgage, make sure your credit report is free of errors and your credit score is above minimum thresholds. Otherwise, you could delay the process or wind up paying more interest than necessary.

You can use AnnualCreditReport.com to access your credit report for free — you don’t even need to share your credit card information. (Although, you will need to provide your name, address, and social security number.) 

The minimum credit score you need to qualify for a mortgage depends on your lender and loan program. For conventional loans, the lowest your score can be is typically between 620 and 660. If your credit score is below this range, prioritize improving your score before you start looking at mortgages. That’s not only financially prudent but also time-conscious.

Read more: How To Improve Your Credit Score, Step By Step

5. Sticking to your first lender

Just as scouting multiple houses can save you money, comparing lenders and rates can keep you from overspending on your mortgage.

I know applications take time and working with several banks can be a hassle — but rate shopping is worth it. Since home prices are so high (relative to all other routine purchases), every percentage point reduction matters, whether it’s on closing costs or your interest rate. Imagine if you cut your interest payment by $100 per month on a 30-year mortgage — that’s a $36,000 difference.

Would you buy the first car you come across at a dealership? Treat your mortgage like buying a car: compare lenders and their rates to save money. 

Read more: Best Mortgage Rates – Mortgage Rates Updated Daily

6. Being unaware of loan programs

9 First-Time Home Buying Mistakes You Should Avoid Making - Being unaware of loan programs

If you’re new to this process, you might not know about select programs that can help you qualify for a mortgage without a flashy credit score or massive down payment.

For example, here are a few common mortgage options:

  • If you’re a member of the military community, you may be eligible for a mortgage that’s backed by the U.S. Department of Veteran Affairs (known as a VA loan).
  • The Federal Housing Administration (FHA) also insures loans. You could qualify for an FHA loan with a credit score of 500 if you make a 10% down payment or with a 580 if you make a 3.5% down payment.
  • If you’re looking to buy a home in a rural area, you could qualify for a USDA loan, which is insured by the U.S. Department of Agriculture. Typically, the USDA requires a minimum score of 580.

Once you decide on a lender, ask them about potential programs for first-time homebuyers. You never know until you ask.

Read more: First-Time Home Buyer State Programs – What You Need To Know As A First-Time Buyer

7. Shortchanging your down payment

Depending on your financial situation, your lender may require you to put as little as 3.5% down when you buy your house. Under some loan programs, you might not have to put anything down at all. However, meeting the minimum doesn’t necessarily maximize your savings.

If you can afford a higher downpayment (without jeopardizing your liquidity), you can significantly reduce your monthly costs, including private mortgage insurance (PMI) and loan interest payments. In turn, there’s less of a strain on your monthly income.

For example, let’s assume you want a conventional 30-year, $350,000 mortgage — but you don’t want to make a down payment. You’ll have to pay a monthly premium for PMI because your down payment is less than 20%.

Estimating a 0.5% PMI rate, that’s an extra $145 coming out of your wallet every month.

On top of that, since your principal balance is higher, your monthly interest expense is higher too. Assuming a 3% interest rate, your monthly loan payment would be $1,475 if you didn’t make a down payment.

Conversely, if you made a 20% down payment, that obligation drops to $1,180 — $295 less per month.

That’s another $106,200 over a 30-year span. If you can manage a higher down payment, it’s worth the investment.

Want to figure out how much you could save? Check out our Mortgage calculator.

8. Draining your savings to afford a new house

9 First-Time Home Buying Mistakes You Should Avoid Making - Draining your savings

Buying a house is a big purchase, but it’s not a go-big-or-go-home purchase (pun 100% intended). A house is not like a new pair of shoes where you can afford to splurge a little here and there. Make sure your home doesn’t drain your current savings and tie up too much of your future income.

For instance, if buying a particular house would require you to spend your emergency fund, you know you’re straying outside of your financial lane. Or, if your loan payments would place an undue strain on your monthly income to the point where you’re struggling to get by, you’re better off looking at a cheaper house.

There’s nothing wrong with downsizing your expectations if it means maintaining financial stability. 

9. Forgoing an inspection to save money or time

Have you ever heard the phrase, “All shine, no substance?”

Well, some houses can look absolutely stunning but be rotten internally.

Even if you have your mind set on a particular property, it’s worth knowing what’s underneath the floorboards and behind the walls. Don’t waive a house inspection to save time — that would go directly against the mentality of not rushing the process.

Otherwise, you risk buying a home with thousands of dollars worth of hidden damage. That’s a financially crippling problem.

Resources for first-time homebuyers

The goal here is to help you avoid making the same mistakes so many homebuyers make, so I’ve gathered a list of resources for you below!

Summary

As a first-time homebuyer, it’s okay to be nervous about such a massive decision. Just don’t let those nerves translate into emotional decisions. Keep a level head, don’t rush the process, and — for your bank account’s sake — make conservative assumptions regarding your budget.

If you take these precautions upfront, you’ll protect yourself from making costly mistakes.

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