First-Time Homebuyer Mistakes to Avoid

Few experiences rival the excitement of buying your first home. Whether you’re eyeing a cozy condo, a sleek townhouse, a spacious McMansion, or a minimalist abode, the journey is exhilarating.

However, as a first-time buyer, the process can feel overwhelming. While first-time sellers might stumble too, they at least have the experience of buying a home to guide them. For those embarking on their first purchase, avoiding common pitfalls can make all the difference. Here are some key first-time homebuyer mistakes to steer clear of:

Avoid These Common Mistakes

1. Rushing the Process

We get it: the housing market is competitive, and with inventory shortages across the U.S., it’s tempting to act fast when you find a home you love. But J.R. Russell, head of direct-to-consumer mortgage lending at Citi, advises against rushing.

“Some people in the industry may tell you that you need to get qualified or under contract ‘immediately’ in this ‘super-competitive’ market, but it's much more nuanced than that,” he explains. The key is to move at a pace that feels right for you. While urgency matters, hasty decisions can lead to regrets later.

2. Neglecting Your Finances

Financial missteps are all too common for first-time buyers. One of the biggest mistakes? Not securing a mortgage pre-approval.

“Not having a pre-approval means you’re not ready to make an offer — even if you find your dream home,” says Saud Rai, broker associate and team leader of the Skywalker Group of The Keyes Company. Without pre-approval, you’ll waste time, miss opportunities, and struggle to compete with other buyers. Plus, pre-approval gives you a clear understanding of your budget.

Other common financial oversights include:

• Failing to check your credit score or address outstanding debts.
• Making large purchases before closing, which could jeopardize your loan approval.
• Not gathering essential documentation like proof of income, tax returns, and records of family financial contributions.

Julie Jones, VP of ultra-luxury sales and broker associate at Douglas Elliman Real Estate, recommends shopping around for mortgage rates by applying to multiple banks or credit unions. Comparing options could save you thousands in the long run.

3. Confusing Pre-Qualification and Pre-Approval

One common mistake for first-time buyers is misunderstanding the difference between being pre-qualified and pre-approved. While these terms might seem interchangeable, they represent distinct steps in the home financing process.

“Pre-qualification can help you set realistic expectations when it comes to buying a house because it provides you with an estimate of how much a lender may lend you,” explains Matt Vernon, head of consumer lending at Bank of America. This initial step offers a general sense of your potential borrowing capacity, but it’s not a guarantee of a loan.

Pre-approval, on the other hand, takes things a step further. “Having pre-approval for a mortgage means the lender has examined your income, credit, and other expenses to determine the mortgage amount you may qualify for,” says Vernon. If approved, you’ll receive a pre-approval letter — essentially an offer to lend you a specific amount, valid for 90 days.

The key difference? Pre-approval signals to sellers that you’re a serious buyer, giving you a competitive edge in today’s fast-paced market. Pre-qualification, while helpful for setting expectations, won’t carry the same weight during negotiations.

4. Relying on Family and Friends Instead of Professionals

It’s natural to seek advice from family and friends during your home-buying journey. However, while their intentions are good, they may not always provide the most accurate or tailored guidance.

“Professionals experienced in the industry are the most valuable assets for first-time home buyers,” says Saade. A trusted realtor or lender will take the time to understand your needs and help you navigate the complexities of the process.

5. Not Exploring All Your Options

Navigating the world of mortgages can be daunting, especially for first-time buyers. However, understanding the full range of mortgage products and assistance programs available to you is essential for making informed decisions.

“Ask your mortgage professional about all options available to you — such as FHA loans, VA loans (if you’re a veteran), or first-time homebuyer programs,” advises J.R. Russell, head of direct-to-consumer mortgage lending at Citi. A good mortgage professional will walk you through the different loan types, explaining their features, benefits, and potential drawbacks. “The amount you save from this conversation, or series of conversations, could mean thousands of dollars more in your pocket over the life of the loan,” Russell emphasizes.

First-Time Buyer Loans and Grant Programs

Many first-time homebuyers overlook valuable loans and grants simply because they aren’t aware these programs exist or don’t think they qualify. “In reality, grants to help make the cost of homeownership more affordable are available for first-time buyers and even for those who have purchased a home before,” says Matt Vernon, head of consumer lending at Bank of America.

For example, programs like Bank of America’s America’s Home Grant provide up to $7,500 to cover closing costs, or up to 3% of the home’s purchase price (whichever is less) for use toward a down payment. These grants can significantly reduce upfront costs, making homeownership more accessible.

In addition to lender-specific grants, many cities and towns offer local homebuying incentives. Researching programs in your desired area can uncover opportunities for savings.

Specialized Programs for Professionals

Certain professions may also qualify for unique first-time buyer incentives. Julie Jones, VP of ultra-luxury sales at Douglas Elliman Real Estate, recommends exploring programs tailored for accountants, physicians, attorneys, and other professionals. These specialized options can provide competitive terms, reduced costs, or other benefits.

Starting this conversation early can make all the difference. “If buying a home is the goal for a year or two down the road, it costs nothing to talk with a lender to understand that part of the home-buying process,” says Lisa Culp Taylor, realtor and team leader at LCT Team-Parks in Franklin, Tennessee. Early consultations with professionals can clarify loan options, identify areas to improve your financial readiness, and set you up for success when you’re ready to buy.

6. Failing to Budget for Closing Costs and Unexpected Expenses

Many first-time buyers are aware of the need for a down payment, but closing costs can often catch them off guard. “It’s important to budget for 3% to 5% of the total cost of the home, or the amount you’re borrowing from the lender,” advises Matt Vernon, head of consumer lending at Bank of America.

Beyond the upfront costs, you should also prepare for hidden expenses. According to a survey, homeowners pay nearly $15,000 in additional costs after moving in. “In addition to closing costs, you’ll likely face repairs and maintenance,” Vernon explains. For instance, you might need to fix plumbing, electrical, heating and cooling systems, or even replace a roof. These expenses are a reality of homeownership and should be factored into your budget.

You’ll also want to avoid surprises with your monthly payments. “Insurance and taxes will likely change once you’ve finalized the sale, so don’t rely on the current costs,” warns Julie Jones, VP of ultra-luxury sales at Douglas Elliman Real Estate. She recommends aligning yourself with a reliable insurance agent to ensure you’re prepared for any changes to your insurance premiums.

7. Settling for a Home That Doesn’t Fit Your Needs

In today’s competitive housing market, it’s easy to feel pressured to make an offer on any available home, but that could lead to dissatisfaction. “Despite limited inventory, it’s usually better to wait for the home that has the majority — if not all — of your ‘must-haves,’ and falls within your budget,” advises J.R. Russell, head of direct-to-consumer mortgage lending at Citi.

Julie Jones agrees, suggesting you closely examine the floor plan to ensure the home will accommodate your lifestyle. “It may not be your forever home, but it should meet your needs for at least the next three years,” she says.

However, it’s essential to strike a balance between your desires and your needs. “Don’t mistake your first home for your lifetime home and create an unrealistic list of priorities,” says Lisa Culp Taylor, realtor and team leader at LCT Team-Parks. She cautions that an overly ambitious list of features can set you up for disappointment.

Conclusion

Buying your first home is an exciting milestone, but it can also come with challenges. By avoiding common mistakes, such as rushing the process, neglecting your finances, or settling for a home that doesn’t truly fit your needs, you can make smarter, more informed decisions that set you up for long-term success.

From understanding mortgage options and securing pre-approval to budgeting for hidden costs and preparing for surprise expenses, every step of the process requires careful planning and attention. Seeking professional advice, researching available programs, and staying patient will help you navigate the complexities of home buying and avoid costly missteps.

Remember, this is a big investment, so take the time to get it right. With the right knowledge and guidance, your dream home is within reach.

At Red Sign Real Estate, we’re here to support you every step of the way. Whether you're just starting your home search or ready to make an offer, our expert team is dedicated to making your first-time homebuying experience as smooth and successful as possible.

Let’s make your homeownership dreams come true!