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10 Expensive First-Time Homebuyer Mistakes

Buying your first home is exciting! But it can also be a complex and overwhelming process, especially for first-time homebuyers. Whether you’re an inexperienced buyer or returning to the market after several years, you’ll want to avoid these costly mistakes so your new home will meet your dreams.

Mistake #1. Borrowing too much money.

Just because you “qualify” for a larger loan doesn’t mean you should take on the maximum debt possible. After all, a lender doesn’t know the details of your monthly budget, and it’s impossible to predict how your financial circumstances may change. So, it’s better to play it safe and borrow an amount that results in a comfortable monthly payment. 

Mistake #2: Not checking your credit report.

Credit scores are a crucial part of your financial profile and can impact your ability to secure a mortgage at the best rate. In addition to doing everything possible to improve your score, it’s essential to examine your report closely to ensure it doesn’t include any mistakes.

Mistake #3: Not comparing lenders.

You can obtain a mortgage from several types of lenders, and there can be significant differences in their customer service. Ideally, you want to work with a loan officer who excels at answering your questions, guides you through the mortgage application process, and ensures your application flows seamlessly through underwriting. You can save yourself costly headaches if you interview lenders before selecting one.

Mistake #4: Failing to shop around for a mortgage.

When selecting a lender, it's also essential to closely examine their mortgage products, including the rate and the fees. The differences between lenders’ fees can be significant, which is why knowing the differences between mortgage interest rates and annual percentage rates (APRs) can reduce the cost of your loan!

Mistake #5: Creating “red flags” during the underwriting process.

Lenders review all the financial facts on your mortgage application before pre-approving your mortgage. But they also recheck those details immediately before closing to ensure your financial profile hasn't changed. That means that delaying significant modifications until after closing is essential—things like changing jobs, opening a new credit card to buy furniture, or moving large sums of money between accounts.

Mistake #6: Skipping the home inspection.

When buying a house, protect yourself financially by including an inspection contingency in your purchase offer. Spending $500-700 now may prevent a $20,000+ expense in your near future if, for example, the inspection reveals the home needs a new roof—spring for the inspection.

Mistake #7: Buying a fixer-upper without the skills or experience to renovate it.

A low-cost house that “needs a little TLC” may be an excellent investment. Still, it may also become a money pit, especially if you must hire professionals to complete significant repairs. Get expert opinions on the home’s condition and cost estimates to complete the work versus doing it yourself. Consider all the pros and cons of fixer-uppers before you leap.

Mistake #8: Overlooking homebuyer assistance programs.

It’s challenging to save enough money to buy a home! However, you might be able to reduce your costs if you search for homebuyer assistance programs at the local, state, or national level. Many types of support are offered, including reduced down payments, down payment assistance, and help covering closing costs. Some programs target first-time buyers, buyers who want to rehab a home, and many others.  

Mistake #9. Buying a home through the seller’s agent.

Imagine you’ve spotted the perfect home for sale. Contacting the agent whose name appears on the listing may seem logical. But that can be a costly mistake, particularly for inexperienced buyers who need an advocate to support them in the biggest purchase of their lives. The listing agent is duty-bound to represent the interests of the seller, not the buyer. 

Mistake #10: Not choosing a qualified buyer’s agent.

The best way to ensure your financial interests are covered is to select an agent who has earned the Accredited Buyer’s Representative (ABR®) designation. With expert help from a qualified real estate professional, you’ll improve your odds of avoiding many of these potentially expensive mistakes.