13 common first-time home buyer mistakes and how to avoid them

Buying your first home is an exhilarating milestone, but small missteps during the process can cost you significant time and money. Failing to compare mortgage rates, skipping the home inspection, or underestimating the total cost of ownership are all common home buying mistakes that trip up first-time home buyers. The good news is that most of these issues are avoidable with a plan and the right support.

Here are 13 first home buyer mistakes to watch for – and how you can avoid them.

1. Not getting mortgage preapproval

Looking at a house without mortgage preapproval is a common first-time home buyer mistake. This is no surprise because, let’s be honest, shopping for homes is way more fun than getting your finances in order.

However, preapproval is the most accurate way to determine how much house you can afford. It also shows real estate agents and sellers you are a serious buyer who’s ready to get a mortgage and close a sale. Some sellers won’t accept offers from buyers who do not have preapproval. Preapproval can strengthen an offer, but it isn’t a final loan commitment.

Preapproval is a mortgage lender’s estimate of how much it expects you can borrow based on a preliminary review of your finances. It’s a more accurate estimate than prequalification, which usually is based on the borrower’s estimates of their finances. Preapproval usually is good for 60 – 90 days, so you’ll want to wait to apply for it until you’re ready to buy.

Rocket Mortgage also offers Verified Approval,¹ an even higher level of initial approval where we verify your credit, income and assets with the documentation you send to us.

How can you avoid this mistake?

Reach out to reputable mortgage lenders and ask lots of questions at the start of your home search so you can find the right fit. Next, apply for mortgage preapproval before you start shopping for homes. Remember to make sure your finances are in good standing so you can receive the most accurate preapproved loan amount.

1. Not getting mortgage preapproval

Looking at a house without mortgage preapproval is a common first-time home buyer mistake. This is no surprise because, let’s be honest, shopping for homes is way more fun than getting your finances in order.

However, preapproval is the most accurate way to determine how much house you can afford. It also shows real estate agents and sellers you are a serious buyer who’s ready to get a mortgage and close a sale. Some sellers won’t accept offers from buyers who do not have preapproval. Preapproval can strengthen an offer, but it isn’t a final loan commitment.

Preapproval is a mortgage lender’s estimate of how much it expects you can borrow based on a preliminary review of your finances. It’s a more accurate estimate than prequalification, which usually is based on the borrower’s estimates of their finances. Preapproval usually is good for 60 – 90 days, so you’ll want to wait to apply for it until you’re ready to buy.

Rocket Mortgage also offers Verified Approval,¹ an even higher level of initial approval where we verify your credit, income and assets with the documentation you send to us.

How can you avoid this mistake?

Reach out to reputable mortgage lenders and ask lots of questions at the start of your home search so you can find the right fit. Next, apply for mortgage preapproval before you start shopping for homes. Remember to make sure your finances are in good standing so you can receive the most accurate preapproved loan amount.

2. Failing to get multiple mortgage rate quotes

Some first-time home buyers accept the first mortgage quote they receive. When it comes to finding the best deal on a home loan, it pays to compare offers from several mortgage lenders. Be sure to shop around. Multiple quotes will take time to get, but finding the best rate will be worth the extra effort.

How can you avoid this mistake?

Getting multiple quotes is the best way for you to choose the right lender and secure a mortgage with the best possible loan conditions. Research reputable lenders, ask for recommendations, and compare several quotes before selecting one. When you compare quotes, look at the APR and lender fees, not just the interest rate.

3. Not working with a real estate agent

Some first-time home buyers consider buying a home without a real estate agent, but this route really may not give you the best chance of success. Having a professional in your corner can make the home buying process go much more smoothly. Real estate agents know the market and process inside out, making missteps less likely and helping you get the best possible deal on a home.

How can you avoid this mistake?

Reach out to family members or friends who’ve recently bought a home or look at online reviews to find a real estate agent who is compatible with your needs. Speak with a few agents to understand the value they provide during the home buying process. Just like with lenders, be sure to shop around and ask questions until you find an agent you’re comfortable with. Common questions to ask include how the agent is paid and what services they include, such as pricing guidance, negotiation, paperwork, and inspection support.

4. Buying more home than you can afford

You’ll want to make sure you’re buying a home you can afford. When a lender reviews your financial information for approval, they use your debt-to-income ratio to see how much of your monthly income goes to paying your debts. If your DTI ratio is on the high side, consider waiting to buy a home until you’ve paid down your debts or increased your income. It’s important to take on only as much debt as you can handle.

How can you avoid this mistake?

Factor in all your regular expenses – not just those that influence your DTI ratio – when determining how much of a monthly mortgage payment you can afford. Your total budget should also include the following:

• Property taxes
• Homeowners insurance
• Utilities and maintenance
• HOA dues

Also consider any cost increases, such as potentially more expensive utility bills, that come with owning a home. You can set yourself up for success by taking the time to estimate all your possible costs.

5. Not checking your credit report

You should know your credit score well in advance of being ready to buy a home. Borrowers need to meet a minimum credit score to get a mortgage, and higher scores can earn you better terms, including a lower interest rate. You should monitor your credit score throughout the mortgage application and home buying process.

Although your lender checks your credit before approving you for a loan, they recheck it before closing. Changes in your credit report could affect your loan. For example, suppose you apply for new credit cards or fail to make payments on a personal loan between the time you’re approved for a mortgage and closing. Your credit score could drop significantly, and your lender could change its mind about your loan.

How can you avoid this mistake?

Monitor your credit report and contest any errors. Once you’re preapproved, avoid taking on new debt and be sure to make your payments on time. Any changes to your credit during the time your preapproval is effective could affect your loan.

6. Waiving the home inspection

While some home buyers may be tempted to forgo the home inspection to save time and money, the value of an inspection should not be underestimated. After the home inspection, you will receive a report on the condition of the home, which will tell you if it needs repairs. If the needed repairs are significant, you may be able to use the report to get the seller to make repairs before closing or lower the purchase price.

If you can’t come to an agreement and you have an inspection contingency in your purchase agreement, you can cancel the sale without penalty and get back any earnest money deposit you paid. The home inspection is one of many tools in your buyer toolbox that help empower you during negotiations with the seller.

How can you avoid this mistake?

Talk with your real estate agent about making your offer contingent on a home inspection. If you’re thinking about waiving the home inspection, speak with your agent about the repercussions. Work with them to make the best decision for your specific home buying situation. If you’re in a competitive market, ask your agent about ways to keep protections without automatically killing the deal.

7. Spending all your savings

Buying a home requires cash up front in the form of a down payment and closing costs, and many first-time home buyers budget only for that amount. This is a mistake, as it’s a good idea to keep some money in reserve for emergencies.

How can you avoid this mistake?

Simply put, save as much money as you can. If you need more time to save, push back your house hunt and focus on saving money. You also can speak with your lender about making a smaller down payment so you can close and still have some money in the bank.

8. Not saving enough money

Many home buyers make the mistake of underestimating the total cash needed to buy and own a home – it’s more than just the down payment. Some costs are due upfront, like prepaid taxes and insurance that can be collected at closing. So how much money should you save to avoid coming up short when you buy a home? The answer is in understanding the expenses to save for when buying a house, including:

• Down payment
• Closing costs
• Homeowners insurance
• Property taxes
• Moving costs
• Home maintenance
• Utility bills
• Homeowners association fees

How can you avoid this mistake?

Do your research so you know what it costs to buy and own a home. If the fees associated with buying a house are too expensive, you may be able to make a home purchase more affordable by taking advantage of first-time home buyer programs or grants available in your area.

9. Not making the right down payment

The amount you put down on a home affects your interest rate and your monthly mortgage payment. While a down payment of at least 20% of the purchase price is a common goal, it’s not required. However, if you put less than 20% down on a conventional loan, you will need to pay for private mortgage insurance.

PMI protects the lender if you default on a conventional loan, and it’s required until you have 20% equity in your home. If you can afford a larger down payment, it may be worth it to avoid paying for PMI.

How can you avoid this mistake?

Make sure you’re aware of the minimum down payment for your loan type. You can also talk with your lender about whether you qualify for any down payment assistance programs. Allocate as much as possible for your down payment, but don’t overstretch your finances. Finding your sweet spot financially in this equation is an important part of the home buying process.

10. Neglecting first-time home buyer programs

First-time home buyer programs and grants are resources that help many people afford a home. Unfortunately, first-time home buyers often overlook this type of assistance. Programs vary by state and city, so check local government websites to see if you qualify. You might be surprised at how much is available to you.

How can you avoid this mistake?

Look online for any local, state or federal programs that provide aid to first-time home buyers. This assistance may include grants, low-interest or forgivable down payment loans, or a reduced interest rate. Your lender may offer its own programs as well. Talk to your loan officer and inquire about any programs your lender offers.

11. Ignoring government-backed loans

Many home buyers apply for conventional financing and don’t fully consider government-backed loans that may be more affordable. These types of loans include:

• Federal Housing Administration loans: FHA loans protect lenders in the event that a borrower defaults on their mortgage. As a result, FHA loans offer lenient minimum credit scores and down payment requirements that many first-time home buyers find attractive. The downside of FHA loans is that you will be required to pay a mortgage insurance premium for at least the first 11 years of your loan repayment term.
• Veterans Affairs loans: VA loans ² are available exclusively to active-duty military personnel, veterans, members of the Reserves and National Guard, and their eligible surviving spouses. The VA minimizes the lender’s risk so they can offer loans with lenient financial requirements. Among the benefits of a VA loan is the opportunity to buy a home with no down payment.
• U.S. Department of Agriculture loans: USDA loans, which also allow for no down payment, can make buying a home in a rural area more affordable. Rocket Mortgage does not currently offer USDA loans.

How can you avoid this mistake?

Explore every possible loan option that might be available to you. Stay determined and ask lots of questions when discussing loan types with your lender. Their job is to show you all the loan types that are out there and help you determine which one is right for you.

12. Not researching the neighborhood

A common first-time home buyer mistake is focusing too much on the house and not enough on the neighborhood. If the surrounding area doesn’t fit your lifestyle or feels comfortable, the home might not be the right choice.

How can you avoid this mistake?

Take the time to research the neighborhood before committing to buying. Go for a walk or a drive around the area and imagine yourself living there. Visit at different times to get a full feel for how noise, traffic, and parking vary during the week and at different times of day. Consider what’s important to you when it comes to your current neighborhood or the neighborhood you grew up in.

13. Making emotional decisions

Buying a home can be an emotional endeavor, but it affects your finances as well. Try to consider the facts and figures along with how a home makes you feel. Remember that this isn’t just a house – it’s likely one of the largest investments you’ll ever make. When dealing with such a decision, it helps to balance how a home feels with what it means for your budget.

How can you avoid this mistake?

Use the expertise and guidance of your real estate agent, who should be working in your best interests both personally and financially. Your agent can make sure you’re not overpaying for a house or overlooking major, expensive issues that could risk your investment. Additionally, write down your nonnegotiables before showings so you can remain anchored to your needs in a home.

Additional tips for first-time buyers

Here are some additional tips for first-time buyers to help you deal with potential obstacles:

• Rely on the professionals. Along with your real estate agent, several other professionals in the real estate industry can be valuable resources to you on your home buying journey. Real estate attorneys, mortgage loan officers, real estate brokers, and other licensed professionals have the experience to help you navigate the process as easily as possible.
• Take a class. Some lenders require first-time home buyers to enroll in an education course that prepares them for the mortgage process and homeownership. It’s also common for lenders to offer a financial incentive in exchange for taking a first-time buyer class. If you take a class, keep your certificate – some programs require proof.

The bottom line: Home buying mistakes are easily preventable

You can avoid the pitfalls of many first-time home buyers when you understand the most common mistakes they make. Talk to trusted friends or family members who recently purchased a home and ask them what they learned along the way. Also, never hesitate to lean on the advice of an experienced real estate agent.

Ready to take the first or next step in your home buying journey? You can start the approval process or talk with a Home Loan Expert about finding the best mortgage for your situation.

¹Participation in the Verified Approval program is based on an underwriter's comprehensive analysis of your credit, income, employment status, assets and debt. If new information materially changes the underwriting decision resulting in a denial of your credit request, if the loan fails to close for a reason outside of Rocket Mortgage's control, including, but not limited to satisfactory insurance, appraisal and title report/search, or if you no longer want to proceed with the loan, your participation in the program will be discontinued. If your eligibility in the program does not change and your mortgage loan does not close due to a Rocket Mortgage error, you will receive the $1,000. This offer does not apply to new purchase loans submitted to Rocket Mortgage through a mortgage broker. Rocket Mortgage reserves the right to cancel this offer at any time. Acceptance of this offer constitutes the acceptance of these terms and conditions, which are subject to change at the sole discretion of Rocket Mortgage. Additional conditions or exclusions may apply.

²Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.

Rocket Mortgage is a trademark of Rocket Mortgage, LLC or its affiliates.