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Moving into new home

Posted on Monday, August 8, 2022 in Mortgage Lending

5 Common Mistakes First-Time Homebuyers Make

Buying your first home can be exiting and stressful. After-all, this is the single largest purchase that most individuals will make in their lifetimes.

There are a lot of homebuying traps that a first-time buyer could fall into. Here are five of the most common mistakes and how you can avoid them.

Buying More Home Than You Really Need or Want

During the prequalification process, you will receive an estimate of how much money you may be able to borrow for your home purchase. Your estimated mortgage payment will also be calculated. These are based in part on the difference between your debt-to-income ratio and your monthly expenses as a whole.

Keep in mind, this is a major financial commitment, one you may be required to fulfill each month for the next 30 years. Just because you can buy a $300,000 home, is that really what you need or want? Will you be comfortable making the mortgage payment or would spending less give you the breathing room you need to travel, give to charity, eat out, and enjoy a fulfilling life.  

Credit checkNot Checking Your Credit Report

Failure to look at your credit score before you seek prequalification or apply for a loan can be a devastating mistake. Lenders will look at your credit during prequalification, during underwriting, and sometimes before closing day to see if there have been any changes.

For example, if you apply for new credit cards or fail to make payments on your outstanding accounts before closing, your credit score could drop significantly, making it difficult to qualify for financing.

Taking a look at your credit score before you even start the homebuying process is also advised. If you’ve got a lower credit score, that means you just need to take steps to improve your credit. Start by making sure you pay your bills on time. A late payment can stay on your credit reports for 7 ½ years.

Falling in Love with a House, and Overlooking the Work that it Needs

It is easy for a first-time homebuyer to become so star-struck by the large kitchen, hardwood floors, and walk-in shower, that they tend to overlook what is really important when buying someone else’s property. Sellers want you to be awed by the glam, that way you won't look at the cracks in the basement walls, leaky roof, and termites eating a way inside your walls.

A home inspection is a must-have for all homebuyers. After the home inspection, you’ll receive a report with any identified or potential issues with the structure and core systems in the house. With that information, you can decide if you want to move forward with the purchase, walk away, or use it to negotiate repairs or a lower purchase price with the seller.

Spending All of Your Savings

Draining your entire savings to make the down payment and to pay the closing costs on a home purchase can put you in a precarious financial position. How will you pay for unexpected homeowner costs or what happens if you face an emergency situation, like your car breaks down.

Be sure to speak to your lender about the different loan options, including loans that require lower down payment amounts.

To prevent depleting your savings, take the extra time to save some money beyond the bare minimum you will need for the down payment and closing costs. Keep in mind there are a number of expenses you will have when you buy a new home, beyond the amount you will need to pay to close your loan. For example, you’ll have to pay for homeowner’s insurance, moving costs, homeowners’ association fees (if applicable), and deposits on all of your new utilities and services. And, you’ll probably want a few pieces of furniture and maybe appliances, like a washer and dryer.

Making an Emotional Decision, Instead of Using Your Head

While buying a home is an emotional decision, don’t get so caught up in the thought of hosting family gatherings or building the pool in your backyard that you ignore making sound financial decisions.

For instance, don’t rush or feel pressured into making an offer. On the flip side, don’t wait too long in a competitive market or your house may slip away. Always get a home inspection and take the time to research your neighborhood. How close are you to the school and what is your proximity to amenities, like the entertainment district and shopping center?

The Bottom Line: Talk to a Trusted and Experienced Lender

With so many things to consider and decisions to make, it is easy to get lost during the homebuying process. Let First National Bank’s experienced mortgage experts help you throughout the journey. When in doubt – just ask.

  1. first-time homebuyer
  2. mortgage loan
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