14 First-Time Homebuyer Mistakes and Tips to Avoid Them

Buying a home can be a complicated process, but understanding and avoiding the following common first-time homebuyer mistakes can lead you down a smoother path to homeownership.

Key takeaways

• Common homebuying mistakes include waiving a home inspection and not working with a real estate agent while house hunting.
• Shopping around for a lender can help you secure your best mortgage rate and loan terms.
• Being aware of these mistakes can help you avoid delays in the closing process.

1. Not applying for a mortgage preapproval

Getting a mortgage preapproval before starting your house hunt can put you in a stronger position when it’s time to submit purchase offers. In today’s competitive housing market, sellers are more likely to take your offer seriously if you’re already preapproved.

Preapproval also gives you a clear understanding of how much a lender is willing to loan you for a mortgage, helping you narrow down your house search and avoid wasting time on homes that are out of your price range. In addition, because the lender’s already reviewed your finances to issue the preapproval, it may lead to a faster and smoother closing process.

How to avoid this mistake: Research mortgage lenders and submit a preapproval application to the one that’s the best fit. You can also apply for preapproval with multiple lenders to see which one offers you the best terms.

2. Not working with a real estate agent

Though you may think you can save money by not using a real estate agent, it can actually lead to unnecessary stress and costly mistakes. A good real estate agent will guide you through each step of the homebuying process, which is particularly important for first-time homebuyers that may have little to no idea of what to expect.

How to avoid this mistake: Interview a few different real estate agents to get a feel for their experience, personality and availability before choosing one. Asking family or friends for recommendations is a good way to find local agents.

3. Not checking your credit score

Though lenders will check your credit report and score during the loan process, it’s still wise to review them yourself. This will help you get a better idea of your financial picture and ensure there are no errors that you’ll need to dispute. You can view your full Equifax, Experian and TransUnion credit reports for free on AnnualCreditReport.com.

How to avoid this mistake: Before you start house hunting, check your credit score and credit report to avoid any surprises.

Don’t know your credit score? Get your free score on LendingTree Spring today.

4. Buying a house you can’t afford

Just because a lender approves you for a certain loan amount doesn’t mean you can comfortably afford the home. This is partly because when lenders calculate your debt-to-income (DTI) ratio — your monthly debt payments compared to your gross monthly income — they don’t consider living expenses like groceries, utility bills and child care costs. When you factor in all of your expenses, you may realize that your mortgage payment budget is smaller than you thought.

How to avoid this mistake: Use a home affordability calculator to figure out how much house you can realistically afford. Once you know that number, it’s important to stick to it and avoid making emotional decisions that could cause financial strain later on.

5. Not saving enough money for closing costs

There are more expenses that go into buying a house than just the down payment. Closing costs range from 2% to 6% of your loan amount, and typically include:

• Loan origination fee
• Appraisal fee
• Home inspection fee
• Title search fee
• Credit check fee
• Property taxes
• Mortgage insurance

In addition to closing costs, it’s important to save money for moving expenses, maintenance and repairs and any items you may need to purchase for your new home.

How to avoid this mistake: Understand that you could end up paying up to 6% in closing costs and save up a sufficient amount of money. Your closing costs will be listed on your loan estimate.

6. Waiving a home inspection

In a competitive housing market, waiving a home inspection can seem like a good way to strengthen your offer — but it’s not without risk. A professional home inspection can help uncover major issues with the home that could be expensive to fix later on. Plus, if the issues are brought to light before closing, you can negotiate repairs or a lower purchase price with the seller.

How to avoid this mistake: It’s generally recommended to order a home inspection, even if it would make your offer less competitive. If you do decide to waive the inspection, be sure you understand the potential consequences.

Learn about the difference between a home inspection and appraisal.

7. Not being truthful on your mortgage application

Lenders take mortgage fraud very seriously and use a variety of tools to vet the information you provide. Loan processors and underwriters also rely on the information shared on your application to approve your loan, and discrepancies or missing information could delay your loan — or even result in a loan denial.

How to avoid this mistake: Fill out the mortgage application carefully and thoroughly and don’t withhold any information. Gather your documents (such as W-2s, tax returns and pay stubs) so you don’t have to guess about the numbers.

8. Draining your savings to buy a home

Buying a home can have high upfront costs that leave you with little to no savings. Try to save a bit more than you need to leave a buffer in case of unexpected repairs or emergencies. A general rule of thumb is to keep three to six months worth of living expenses in a savings account.

How to avoid this mistake: Save more than needed for your home purchase, or buy a cheaper house, so you won’t need to spend as much upfront. This can help you avoid becoming house poor.

9. Not considering government-backed mortgages

A conventional loan isn’t your only option as a first-time homebuyer. Government-backed mortgages (such as FHA, VA and USDA loans) are usually easier to get approved for than conventional home loans, and generally have lower down payment and credit score requirements. Here’s a quick breakdown of each option:

• FHA loans. These loans are insured by the Federal Housing Administration (FHA). You could put down as little as 3.5% if your credit score is 580 or higher, or 10% down with as low as a 500 credit score.
• VA loans. Available to military members through the U.S. Department of Veterans Affairs (VA) and have no minimum down payment or credit score requirement (though most VA lenders require at least a 620).
• USDA loans. The U.S. Department of Agriculture (USDA) guarantees loans to borrowers in rural areas for as little as 0% down.

How to avoid this mistake: When researching different loan types, consider both conventional and government-backed options.

10. Applying for new credit during the loan process

Lenders will likely run your credit multiple times throughout the mortgage process, which is why it’s important to avoid applying for new credit cards or making other major financial changes during the homebuying process.

How to avoid this mistake: If you need to take out new credit (such as a new credit card or auto loan), try to do so before or after buying a home.

11. Receiving large cash deposits

Unexpected large deposits can be a red flag for lenders, and they could cause delays in the closing process. If a large, unexplained deposit is uncovered during underwriting, the lender may request additional information about the funds, which may involve submitting a letter of explanation.

How to avoid this mistake: A large, unusual deposit into your bank account can look suspicious — avoid this issue by depositing funds at least three months before you apply for a mortgage.

12. Only considering one lender

Mortgage rates, terms and requirements can vary significantly between lenders, which is why it’s important to compare a few different lenders before choosing one. This can help ensure you find the best deal for your needs.

How to avoid this mistake: The Consumer Financial Protection Bureau (CFPB) recommends comparing quotes from at least three lenders before making a decision.

13. Not utilizing first-time homebuyer resources

There are many first-time homebuyer programs available on the federal, state and local levels. Researching resources in your area may uncover down payment assistance or grants that could help make buying a home more affordable.

How to avoid this mistake: Ask your real estate agent for guidance, and do your own research to identify local first-time homebuyer programs.

14. Not squaring away gift money

If you’re expecting to receive a cash gift from a relative or friend to go toward your home purchase, it’s best to square away those details as soon as possible. Before applying for a mortgage, discuss how much they’re willing to provide and when you can expect to receive it.

How to avoid this mistake: Talk to your gift donor early in the homebuying process to avoid any miscommunication later. Your lender may request a gift letter to verify the funds and where they’re coming from.