There are tooooons of reasons why owning your own home is the best. But as a first-time home buyer, the process of getting from renting to owning is a chore-and-a-half. There are seemingly infinite steps involving dozens of people and a million ways to get things wrong.
That’s a lot of pressure.
After all, nobody really taught you how to buy your first home! If you’re anything like us, your schooling was more focused on the Pythagorean Theorem and how mitochondria are the powerhouses of the cell. (Thanks, U.S. Education System.)
But never fear! As your real estate ally, we can give you a leg up on this whole home-buying thing.
13 Things First-Time Home Buyers Shouldn’t Do
Mistake #1 - Ignore your credit report.
Mortgage lenders use your credit report to decide how much they’re willing to lend you and how much interest they’ll tack on to your loan. So, if your credit report isn’t accurate, you might get a less-than-stellar quote.
Request your free credit report from each of the three main credit bureaus, and dispute any errors you find before talking with a lender.
Mistake #2 - Make other major purchases.
You’ve checked your credit report, disputed any errors, and… Congratulations! Your credit is in excellent shape. So you decide, “What the heck… I need a new car to go with my new house!”
STOOOOOOOOP!
The lending process isn’t over when you get that pre-approval letter (see #3). Mortgage lenders will pull another credit report just before closing to finalize your loan approval. That means any new lines of credit can jeopardize closing.
So keep things totally status quo until after you have your keys. Don’t open new cards, close existing accounts, take out new loans, or make large purchases before closing day.
(Pssst! If you’re credit’s not so hot, try these tips to improve your credit score.)
Mistake #3 - Wait too long to talk with a lender.
Most first-time home buyers start viewing homes before they meet with a mortgage lender. But in the competitive market that is real estate, no offer will be taken seriously without pre-approval from a lender. That’s because sellers don’t want to take a risk on someone who isn’t even sure they can get a mortgage, especially with so many offers on the table.
So start by getting a pre-approval letter and then start looking at houses. That letter gives you serious buying power!
Mistake #4 - Talk to only one lender.
Most first-time home buyers talk with only one lender. The problem is, different lenders can give you different mortgage amounts and interest rates. So, it’s best to shop around—talking to at least three mortgage lenders—before locking in an agreement.
Learn how to choose the right mortgage lender for you.
Mistake #5 - Overlook FHA, VA, and USDA loans.
As you’re looking to get your dream home funded, you’ll come across various types of mortgages. If you don’t have enough down payment or your credit is crap, you might think you’re SOL. But that’s not true!
Several government-issues loan programs might take a chance on you when traditional mortgages fail:
Federal Housing Administration (FHA) loans require just 3.5% down with a minimum 580 credit score.
Veterans Affair (VA) loans—for eligible active-duty folks, veterans, and military spouses—don’t require a down payment and cap lender fees to keep things more affordable.
US Department of Agriculture (USDA) loans incentivize you to buy in rural areas. If you qualify, you could forego your down payment!
Take the time to research these additional loan programs to see if you qualify.
Mistake #6 - Forget about first-time home buyer assistance programs.
In addition to some specialty loans, you might also qualify for some first-timer assistance programs. From free, local classes on homebuying and homeownership to grants that give you cash assistance toward your down payment, there’s plenty of help available. Ask your mortgage lender about their first-time home buyer programs and buying options.
Mistake #7 - Assume you need a 20% down payment.
The age-old standard is that you need to put down 20% of a home’s sale price. While this does help you avoid private mortgage insurance, and it might win you a lower interest rate, it doesn’t do much else.
Keep in mind, it could take years—usually around 7—to save up enough for a hefty down payment. And delaying your home purchase for some relatively arbitrary savings goal could mean putting other financial goals on hold!
Instead, consider how much you need to put down to make your monthly payments reasonable. If a manageable monthly payment means draining your savings or waiting forever to purchase, it’s not the home for you.
Mistake #8 - Spend your max loan amount.
Soooo, you’ve just been approved for a $600,000 loan. Please hear this: That does not necessarily mean you can afford a $600,000 home.
See, lenders let people borrow waaaaaaaay more than they can actually afford. It’s not that they do it on purpose; it’s just that they don’t have a complete picture of how people spend their money.
For example, through your mortgage application, your lender will find out your income, how much money you have in the bank, and how much you owe other lenders for car payments, student loans, and so on.
What they don’t ask about are things like how much that bougie doggy daycare sets you back, what you spend on hiking and skiing gear every season, or what your savings goals are.
Listen, it’s really easy to fall in love with homes that stretch your budget. But buying a home that’s more than you can afford puts you at risk of foreclosure if you fall on tough times. Plus, you still need to leave a healthy cushion for your other bills and expenses.
So as you’re looking for your first home, focus on your estimated monthly mortgage payment, not your total loan approval.
Mistake #9 - Overlook the hidden costs of moving.
You probably know about closing costs—the final fees that finish your real estate transaction: down payments, taxes, title fees, and more.
What most people neglect to consider are the hidden costs of moving: packing supplies, initial repairs, new furniture, pet boarding during the move, ordering take-out the first week (or more) in your new place—anything and everything that affects your move. Be sure to save for these expenses, too!
Mistake #10 - Rely on Zillow (and other real estate websites).
It’s 1 am, and you’re on a deep dive into all the real estate websites. (Zillow and Trulia truly have a grip on you!)
While these websites are great for looking (and dreaming), they’re actually not that useful. Their search functionality is limited, their listings are out of date, and they’re super spammy.
Instead, ask your real estate agent about the Multiple Listing Services (MLS)! Here you get up-to-date, local listings only available to the pros (and those working with them).
Mistake #11 - Brush off the neighborhood vibes.
When you’re looking homes, be sure to consider where they’re situated. The neighborhood you end up in matters, too!
Find a place where the culture and values match your own, then focus on house-hunting. Depending on your needs and preferences, that might include school ratings, commute times, nearest Starbucks, and so on. It’s even smart to visit the neighborhood at various times during the day to see what it’s really like!
Mistake #12 - Wait for The One.
Yes, finding The One is the ultimate goal. But finding a home that ticks every.single.box is unlikely. And looking for perfection will limit your search, at best. At worst, you could end up throwing your budget out the window. Instead, keep an open mind throughout the process. You never know what you’re going to find!
Mistake #13 - Hire bad help.
Your real estate agent is a necessary and important part of your first-time home buyer experience. They’ll help you understand your local housing market, find and tour homes, submit your offer, negotiate contracts, and more. Interview a few and hire the one you vibe best with—from credentials to experience to real estate philosophy.
Feeling overwhelmed?
It’s a lot to take in! But we’ve got your back. Book a Discovery meeting and we’ll answer all your first-time home buyer questions… with zero pressure. If you choose to stick with us, we’ll be by your side the whole way through. Schedule now!
