16 first-time homebuyer mistakes to avoid

Buying your first home is an exciting time, but it’s also one of the most significant financial decisions many people make. These tips can help you navigate the homebuying process and avoid some of the most common mistakes while you’re shopping for a mortgage, hunting for a house and preparing to move in.

Common mistakes when buying your first home

1. Looking for a home before applying for a mortgage

When you’re buying your first house, you might be tempted to view homes before speaking to a mortgage lender. But in today’s tight market, not having a mortgage preapproval on hand when you view homes can lead to sellers not taking your offer seriously. That’s because sellers won’t want to take a risk on someone who isn’t even certain they can get financing — especially when they have many other offers on the table.

If you find a home you like, you may pay less than you would have during the height of the pandemic and subsequent supply shortages. Housing prices reached a peak in Q4 2022, when the median home price was $479,500. Comparatively, the average home price in Q4 of 2024 was $419,200, according to HUD data.

When you get preapproved, you might also consider locking in your interest rate. Doing so will help you get a handle on costs and lessen any concerns about rising rates when you do make an offer.

How this affects you: You might be in a tricky situation if a home you love hits the market and you haven’t consulted a lender. You might also look at homes that you can’t afford.

What to do instead: “Before you fall in love with that gorgeous dream house you’ve been eyeing, be sure to get a fully underwritten preapproval,” says Alfredo Arteaga, a loan originator with CommLoan in Newport Beach, California. Being preapproved shows that you’re a serious buyer whose credit and finances pass muster to successfully get a loan.

2. Fixating on the house over the neighborhood

Sure, you want a home that checks off the items on your wish list and meets your needs. Buying purely based off of a home’s cosmetics, however, can be short-sighted if you’re purchasing in a neighborhood you dislike or an area that proves inconvenient, says Alison Bernstein, founder of Starter Ventures in New York City.

Selecting the right town is critical to your life and family development. The goal is to find you and your brood a place where the culture and values of the [area] match yours. You can always trade up or down for a new home, add a third bathroom or renovate a basement.

— Alison Bernstein Founder, Starter Ventures

How this affects you: You could wind up loving your home but hating your neighborhood.

What to do instead: Settle on what your priorities are in a community, and do your homework. Depending on your needs or preferences, you might want to research school ratings, commute time and other factors. You could visit the neighborhood at different times to get a sense of traffic flow and see if it’s an area that’d appeal to you. The right neighborhood is a more important fit than the right home, at least to start out with — improvements can be made to the property, but the area will be slower to change.

3. Waiting for the “unicorn”

Unicorns are mythical creatures in nature and real estate. One of the most common first-time homebuyer mistakes is looking for a home that checks each of your boxes. Searching for perfection can narrow your choices and lead you to pass over good, suitable options for starter homes in the hopes that something better will come along. Don’t let pie-in-the-sky thinking sabotage your search, says James D’Astice, a real estate broker with Compass in Chicago.

How this affects you: Looking for that dream home might limit your real estate search. In addition, doing so can lead to you missing opportunities or overpaying for a home.

What to do instead: Keep an open mind about what’s on the market and be willing to put in some sweat equity, says Ralph DiBugnara, president of Home Qualified in New York City. He notes there are loan programs that let you roll the cost of repairs and renovations into your mortgage, too.

4. Making decisions based on emotion

Selecting your first home is not just a financial decision, but it’s often also an emotional one. It’s only natural to have high hopes and dreams about the house you’ll buy and make your own. The key is to avoid letting those feelings deter you from being practical when it comes to your budget and long-term goals. Your budget should be one of the primary factors that inform a purchase decision.

How this affects you: Emotional decisions could lead to overpaying for a home and stretching yourself beyond your financial means.

What to do instead: “Have a budget and stick to it,” says DiBugnara. “Don’t become emotionally attached to a home that is not yours.”

5. Talking to only one lender

Shopping around with multiple lenders for a mortgage is an often overlooked step in the homebuying process, especially for first-time buyers. But skipping this process can be costly. Comparing offers from various lenders allows you to snag the most competitive rate and loan terms. Even a small difference in the interest rate can amount to thousands of dollars saved over the loan term.

How this affects you: The more you shop around, the better basis for comparison you’ll have to ensure you’re getting a good deal and the lowest rates possible.

What to do instead: Consult at least three different lenders. Since rates change frequently, aim to get rate quotes on the same day. Compare rates, lender fees and loan terms. Don’t discount customer service and lender responsiveness because both play key roles in making the mortgage approval process run smoothly. Bankrate’s mortgage rate tables are a great place to start comparison shopping.

6. Being careless with credit

Your credit score is a key part of making homeownership dreams a reality. A mortgage lender will check your credit report when you apply for mortgage preapproval and once more before closing to ensure your financial profile hasn’t changed in a way that impacts your ability to repay the loan.

How this affects you: An important thing to know as a first-time homebuyer is that any new loans or credit card accounts on your credit report can jeopardize the closing and final loan approval. Buyers, especially first-timers, often learn this lesson the hard way.

What to do instead: From preapproval to closing, avoid making any significant changes to your finances, including opening new credit cards, closing existing accounts, or making large purchases on existing credit accounts. Pay down your existing balances to below 30 percent of your available credit limit, if you can, and pay your bills on time and in full every month.

7. Overlooking FHA, VA and USDA loans

Hopeful first-time buyers might find it challenging to save up for a down payment on a home in the current market. If you have little saved for a down payment or your credit isn’t stellar, you might have trouble qualifying for a conventional loan.

How this affects you: You might assume you have no financing options and delay your home search.

What to do instead: Look into one of the three government-insured loan programs backed by the Federal Housing Administration (FHA loans), U.S. Department of Veterans Affairs (VA loans) and U.S. Department of Agriculture (USDA loans). Here’s a brief overview of each:

• FHA loans require just 3.5 percent down with a minimum 580 credit score. If your credit score would disqualify you from a conventional loan, an FHA loan could be a viable alternative; this loan allows for a score as low as 500, granted you can put down 10 percent. The major drawback to these loans is mandatory mortgage insurance, paid annually and upfront at closing.
• VA loans are only for eligible active-duty and veteran military service members and their spouses. These loans come with no down payment requirement, but some borrowers may pay a funding fee. Private lenders offer VA loans and come with a cap on lender fees to keep borrowing costs affordable.
• USDA loans help moderate- to low-income borrowers buy homes in rural areas. You must purchase a home in a USDA-eligible area and meet certain income limits to qualify. Like VA loans, USDA loans do not require a down payment.

8. Moving too fast

Buying a home can be a complex process, particularly when you get into the weeds of mortgage underwriting. Rushing the process can cost you later, says Nick Bush, a full-time Realtor at eXp Realty and founder of the Cobi Company. “The biggest mistake that I see is to not plan far enough ahead for the purchase,” says Bush.

How this affects you: Rushing the process means you might not save enough for a down payment and closing costs. It also means that you might not have enough time to address issues on your credit report that could keep you from securing more favorable loan terms.

What to do instead: Map out your homebuying timeline at least a year in advance. Keep in mind it can take months — even years — to repair poor credit and save enough for a down payment. Focus on improving your credit score, paying off debt and saving for a down payment. That way, you’ll be in the strongest position possible to get preapproved.

9. Buying more house than you can afford

Stretching your budget to buy a home you fall in love with is another first-time homebuyer mistake to avoid. With high home prices and mortgage rates, sticking close to your budget and not overextending is especially important.

How this affects you: Buying a home outside of your budget, even by a little bit, can put you at higher risk of foreclosure if you undergo a financial hardship, such as job loss or serious illness. A higher mortgage payment means you’ll have less room in your monthly budget for other bills and expenses. Being “house poor” can also crowd out other opportunities, such as funding a retirement account, a child’s education fund or savings for a vacation.

What to do instead: Focus on what monthly payment you can afford rather than fixating on the maximum loan amount you qualify for. Just because you can qualify for a $300,000 loan doesn’t mean you can comfortably handle the monthly payments that come with it. Factor in your whole financial profile when determining how much house you can afford.

10. Draining your savings

Spending all or most of your savings on the down payment and closing costs is one of the biggest first-time homebuyer mistakes, says Ed Conarchy, branch manager with Guild Mortgage in Gurnee, Illinois.

Some people scrape all their money together to make the 20 percent down payment so they don’t have to pay for mortgage insurance, but they are picking the wrong poison because they are left with no savings at all.

— Ed Conarchy Branch Manager, Guild Mortgage

How this affects you: Homebuyers who put 20 percent or more down don’t have to pay for private mortgage insurance (PMI) when borrowing a conventional mortgage. That usually translates to substantial savings on the monthly mortgage payment, but it’s not worth the risk of living on the edge, says Conarchy.

What to do instead: Aim to have three to six months of living expenses in an emergency fund, even after you close. Paying mortgage insurance isn’t ideal, but depleting your emergency or retirement savings to make a large down payment is a risk best avoided. And you can remove PMI on a conventional loan once you’ve achieved 80 percent equity in your home.

11. Assuming you need a 20 percent down payment

The long-held belief that you must put down 20 percent is (often) a myth. While a 20 percent down payment does help you avoid mortgage insurance, many buyers today don’t want to (or can’t) put down that much money. In fact, the typical down payment on a home was 9 percent for first-time buyers in 2024, according to the National Association of Realtors. Some communities like co-ops or condos, could still require a larger down payment, so check with your real estate agent about specific community requirements and budget accordingly.

How this affects you: Delaying your home purchase to save 20 percent could take years. It could also limit your ability to achieve other financial goals, such as maximizing your retirement savings, adding to your emergency fund or paying down high-interest debt.

What to do instead: Consider other mortgage options. You can put as little as 3 percent down on a conventional mortgage, and FHA loans only require 3.5 percent down if your credit score is 580 or above. With some other types of loans, you might even be able to secure a mortgage with no down payment at all.

​​12. Missing out on assistance programs

Before you buy a home, make sure you explore first-time homebuyer programs to see if you qualify for any assistance. These types of programs are generally offered at the federal, state and local levels, but sometimes lenders offer discounts for first-timers. For instance, each state operates a housing finance authority, which offers programs that provide down payment and closing cost assistance.

How this affects you: If you skip researching first-time homebuyer assistance programs, you might pay more for a down payment or closing costs than you needed to. Or, you could miss out on loans with favorable terms for first-timers.

What to do instead: Check out your local, state and federal housing authority websites to find out what loans and grants may be available to first-time homebuyers.

13. Not lining up gift money

Are you counting on family or friends to help you make a down payment toward your home purchase? If so, it’s important to finalize such financial details well before applying for a mortgage — not doing so could hinder the approval process.

How this affects you: “The time to confirm that the Bank of Mom and Dad is ready, willing and able to provide you with help for your down payment is before you start home shopping,” says Dana Scanlon, a Realtor with Keller Williams Capital Properties in Bethesda, Maryland. “If a buyer ratifies a contract to purchase a home with an understanding that they will be getting gift money, and the gift money fails to materialize, they can lose their earnest money deposit.”

What to do instead: If someone offers you gift money toward a down payment, discuss how much they want to give and when you can expect to get it. Make a copy of the check or electronic transfer showing how and when the money traded hands from the gift donor to you. Often, a lender will request a gift letter to verify the funds and their source, so be prepared to provide one if asked.

14. Not negotiating a homebuyer rebate

Many first-time buyers are unfamiliar with the concept of homebuyer rebates, also known as commission rebates. These rebates can be up to 1 percent of the home’s sales price and come out of the buyer agent’s commission, says Ben Mizes, co-founder and president of Clever Real Estate in St. Louis.

How this affects you: Homebuyer rebates are available in most U.S. states, but not all. Currently, eight states prohibit homebuyer rebates: Alabama (only certain types), Alaska, Kansas, Mississippi, Missouri, Oklahoma, Oregon and Tennessee.

What to do instead: If you live in a state that allows homebuyer rebates, see if your agent is willing to provide one at closing. On a $400,000 home purchase, this could equate to $4,000 in savings.

15. Ignoring moving and other upfront costs

Once you’ve closed on the home sale, the next step is getting ready to move in. For many people, that involves paying for movers, unless you plan to transport your belongings yourself. The average cost for professional movers ranges from about $800 to more than $2500, according to Angi. Setting aside money for necessary renovations or repairs is another important consideration to budget for.

How this affects you: If you forget to include the cost of moving — even just the purchase of packing supplies can add up — you may end up in a challenging financial position. In addition, not putting money aside for even minor renovations or updates can make a difference in the comfort of your new home.

What to do instead: Learn about upfront moving costs and budget for a tip. If you are planning a renovation or repairs, price out everything from the cost of building materials and products to the actual construction. Try to get as many estimates for the work from your contractor ahead of time.

16. Overlooking the hidden costs of homeownership

One of the most important things to know as a first-time homebuyer is that owning a home costs more than you think. Beyond your monthly principal and interest payment, there are other costs of owning a home that can add up, such as property taxes, homeowners/hazard insurance and utilities. Plus, don’t forget about common maintenance and upkeep costs, as well as other hidden costs like pest prevention and replacing smoke alarm batteries.

How this affects you: All told, you could end up paying thousands per year for taxes, insurance and maintenance costs. Not having enough cushion in your monthly budget or emergency fund to cover these costs could quickly strain your finances.

What to do instead: Your real estate agent or lender can help you crunch numbers on taxes, insurance and utility bills. Shop around for insurance coverage to compare quotes. Finally, aim to set aside at least 1 percent to 3 percent of the home’s purchase price annually for repairs and maintenance expenses.

Next steps for first-time homebuyers

With these first-time homebuying mistakes to avoid fresh in mind, you can start making progress on the right steps forward. If you’d like more novice-oriented advice, check out our first-time homebuyer guide and our discussion of who can qualify as a first-time homebuyer.