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10 First Time Home Buyer Mistakes You Can Totally Avoid

Untitled Design (23)
Nick Cunningham
Untitled Design (23)

Buying your first home is one of the most exciting things you get to do as an adult. You choose your own neighborhood, find the perfect house, make your list of needs and wants, and finally negotiate the details.

It can also be a total nightmare if you aren’t prepared.

The good news is there are decades upon decades of first time home buyers who have come before you, and made all the mistakes you can imagine. Luckily, instead of risking long-term emotional and financial stress resulting from poor decision making, you can read a quick blog post about how to avoid making these first time home buyer mistakes yourself.

1. Not Knowing Your Credit Score Before You Apply for a Loan

Planning to buy a house without knowing your credit score is a bad idea. Yet, a lot of people who sit down to apply for a loan to buy their first house have no idea what their credit score might be. The list of reasons people avoid checking their credit is pretty simple, and almost always stems from wanting to avoid bad news, or mistakenly thinking it will lower their score to check it.

Don’t avoid your credit score. It won’t lower your credit score to find out what’s on your credit reports, because that kind of inquiry into your credit is counted differently than an inquiry from a bank or credit card company looking into your credit to see if you’re ok to lend money to.

first time home buyers checklist

It’s probably not as bad as you think, and if you don’t check it, you’re missing out on an opportunity to fix whatever might be wrong with it before you get serious about buying a house. The better the credit score, the lower the interest rate you’ll be offered by lenders, saving you money over the long haul. But even a decent credit score will often get you a good rate, so don’t avoid your credit score just because it might not be perfect.

Investigate your credit score and learn how to make it work for you. There are lots of apps to help you monitor your credit score, and even give you tips for ways to improve it.

2. Finding a House Before Finding a Loan

We get it, it’s waaay more fun to go look at houses and talk floorplans than go meet with a stranger and spill your financial guts onto the table. But the right way to start shopping for a house (and the best way to compete in a crowded market), is with a fully vetted pre-approval in hand. That means shopping for a loan before you shop for a house.


If you start shopping without knowing your real budget and projected loan limits, you risk falling in love with a house that ends up being out of your price range, or losing the perfect house to another buyer who was more prepared, and could make an offer without waiting to get approval first.

Get a loan pre-approved first, and you’ll take a huge chunk of the stress out of buying your first home. With a pre-approval letter in hand, you’ll be ready to pounce on the right home as soon as you decide you want it.

Most first time homebuyers decide their price point based upon what their monthly payment is going to be. A lot of the online calculators and payment estimates you find on popular websites are deliberately misleading, designed to phish for your information (which sadly, is ultimately sold).

Instead of getting your hopes up based on a deliberately misleading monthly payment estimate, talk with a mortgage professional you trust to find out what a real monthly payment will be, including property insurance, property taxes and HOA dues if applicable.

3. Finding a Realtor Before Finding a Loan

Realtors and mortgage brokers work together to help you buy a house, so a lot of them have their favorites to work with. At times, that can end up costing the buyer money.

Sometimes a real estate company and mortgage brokerage will even be owned by the same parent company. In that situation, realtors are often incentivized to recommend a buyer use their favorite loan officer to find a loan because they stand to get paid more that way. There are lots of federal and state laws to help protect against this but unfortunately the practices are still prevalent.

Mortgage brokers, on the other hand, aren’t allowed to accept any kind of payment from a realtor for recommending them to a client, so they have no other incentive to do so.

Don’t get us wrong, we’re not saying there aren’t great realtors out there who always have the client’s best interest in mind, but when the stakes are this high, you have to consider what motivations might be at play.

Make the whole process of finding your first home a lot easier and less stressful by finding a great mortgage broker you can trust. They will help you comfortably navigate one of the biggest financial decisions of your life, and you’ll be more likely to have a smooth sailing purchase transaction since all the players have only your best interest in mind from the start.

4. Taking the First Loan You are Offered

Buyers new to the loan process are often intimidated by all the paperwork, feeling of exposure, and unfamiliar vocabulary. They want a house so bad they are willing to take the first pre-approval they get, just to avoid potential rejection somewhere else.

Some people are also under the misconception they are somehow bound to the pre-approval they get from a bank or lender. This is NOT true. You are not bound to the loan you are quoted until you sign on the dotted line and take ownership of the house Few Mortgage bankers and brokers will tell you that you have no legal or binding obligation to continue with their services after a pre-approval, but the truth is you have the power to switch lenders at any time.

Unless you have a deep understanding of your financial positioning and how residential lending works under the hood, it’s smart to shop around for a great broker you can trust, and look at several different options for loans.

A good, honest broker will encourage you to do so, and if your broker tells you any different...run. Remember rate definitely matters but it isn’t everything. The best experiences come from a mixture of a great rate and great service. Too high a rate and excessive service or a super low rate and terrible service tend to lead people frustrated, but the perfect mix of rate and service leaves people happy knowing they received a great deal.

5. Giving emotions purchasing power

Emotion plays a part in most of our purchasing decisions. In fact, advertising professionals count on it. If you didn’t tear up during the Super Bowl commercials, businesses wouldn’t make money.

But if you want your first home to be a good investment, you’ve got to try to keep as much emotion out of it as possible.

First time home buyers are especially vulnerable when it comes to letting emotions run wild. We imagine the milestones we’ll experience there: having and raising children, entertaining our friends, celebrating holidays with family...

Unfortunately, giving your emotions permissions to dictate the purchase price of a home can drive the price way up, and leave you with more debt than you really need. Try to stay logical and remember that this probably won’t be your ‘forever’ home.

Most families move a few times in their early years as they build wealth and move up the economic food chain. Getting into too much house right off the bat will slow your upward momentum and put you at a disadvantage. Make your list of wants vs. needs and stick to the list so you don’t get wrapped up in a color scheme you love, or a beautiful kitchen that might be a little out of the price range.

6. Not Giving Themselves Enough Time to Move and Get Settled

Buying a house is stressful, and moving is stressful, and being married, and working, and managing finances is stressful. If you’re trying to do all this in a very narrow window of time, expect it to be… extra stressful.

Do yourself a favor and just plan on renting your current home for a month after you close escrow on your first home purchase. Many young borrowers try to squeeze a few thousand dollars out of the transaction by making the switch in a few days, so they can save the rent they would be paying during the month grace period they have between buying their house and having to make their first mortgage payment.

This just causes chaos and tense emotions, and makes the first few days in your new home a nightmare of hurry and worry. Plan ahead and just include that money in the overall cost estimate to buy your first home. You’ll have much better memories of your first few weeks in your new home.

7. Putting Every Dime of Savings Toward the Down Payment

The down payment isn’t the only cost associated with your home purchase. Unfortunately, so much attention has been given to how much down payment needs to be saved to buy a house, there’s been little education pointed at the other expenses you will encounter when during the process of buying a home.

Consider these other costs that might pop up when you’re buying a home:

  • Closing costs
  • Inspection fees
  • Moving/relocation expenses
  • Time off work
  • New furniture or decor
  • Cleaning services
  • Surveys
  • Wire transfers

Plan to buy your house with enough money to put the down payment on the house, and still have some left over as a cushion. Even if it takes you a couple more months, and you feel impatient...just slow down. You’ll be much better off in the long run if you have a few pennies to rub together, and your wings aren’t clipped after you land in your new nest.

8. Not Reading the Contract You’re Signing

The amount of paperwork involved in a buying a home is insane. Every little bit has a purpose, but it’s enough to make the average person change their mind and decide it’s not worth it. It totally is, and it doesn’t have to be that complicated.

Familiarize yourself with some of the real estate terms and mortgage lingo before you start shopping, and you’ll be a lot more comfortable when it comes time to put pen to paper. Certain sections about which appliances stay or go, specific times of day the seller is expected to be gone, and which closing costs you’ll be responsible for can be buried in the fine print under fancy lingo, or simply overlooked in all the paper.

Work with a good mortgage broker and realtor who are patient and take time to make sure you understand everything you’re signing.

9. Giving the Bank a Reason to Deny Your Home Loan

After you accept the proposed terms of your future home loan, and collect the documents you’ll use to prove your creditworthiness, the lender goes to work verifying all your information to make sure you are likely to be a safe bet to lend money to.

Don’t make any sudden moves!

You’ll want to avoid making any financial waves while your loan is in process. Lenders are like deer in a quiet thicket. If they sense any danger (you not being a good candidate to pay their money back), they’ll bolt, and leave you without a loan.

Avoid any of these red flags:

  • Applying for credit cards or other loans - The last thing a lender wants to see is you taking on more potential debt that could impair your ability to repay the money you owe them.
  • Changing jobs - it looks good if you’ve been at least in the same industry for at least two years, even if you’ve moved jobs here and there, but making a job change in the middle of a home purchase is a bad idea.
  • Getting behind on bills - missing payments on any kind of bill while your loan is being processed can look like an indication of how you might treat your loan payments. Don’t get behind.
  • Spending a bunch of money on existing credit cards - any debt you rack up before your loan is finalized gets added to the debt portion of your debt-to-income ratio...which means if you’re on the border, you could lose the loan over a few hundred dollars.

10. Underestimating the Ongoing Costs of Owning a Home

When you rent a house, a lot of the ownership costs are being paid for behind the scenes. Common expenses that catch first new homeowners buy surprise are:

  • Property Taxes
  • Insurance
  • Homeowners Association Dues
  • Landscaping Upkeep
  • Preventative Maintenance
  • Improvement Costs
  • Higher electric and water bills

The solution? Create a realistic budget before you even start looking.

Look at all the costs you could ever encounter, and make room to allocate money to them before they become a problem. Property taxes and insurance can be managed in an impound account, and collected with your mortgage payment each month, but inconsistent expenses home repairs and maintenance can be budgeted for gradually.

You can make your first home buying experience as awful or as enjoyable as you want. All you need to do is slow down, think about what you’re getting into, and work with someone you trust. Find your team, work the plan, and you’ll end up enjoying the process, building equity, and being more likely to succeed in future transactions as well.

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