About · Press · Contact · Write For Us · Top Personal Finance Blogs
Featured In:

7 Common Mistakes Made by First-Time Home Buyers

By Valencia Higuera

couple house shoppingWhen I bought my first house a few years ago, I quickly discovered that there’s nothing cheap about the process. With closing costs, the down payment, the home inspection, and the home appraisal, you can wipe out your savings before you even receive the keys to your new home.

These expenses can be particularly difficult to control for first-time home buyers, who may be naive to the process. However, by educating yourself, you can avoid common mistakes and potentially save yourself a great deal of money.

First-Time Home Buying Mistakes

Financial Mistakes

Though you surely want a home that has a lot to offer, it’s imperative to keep costs to a minimum. If you rush a purchase or make unwise decisions, you could end up spending more than you budgeted for.

1. Choosing a Risky Loan
Talk to a mortgage broker or a loan officer to receive information on various types of loan products – there are mortgage loans for practically every person and situation. However, if you don’t educate yourself on the various products, this increases your chances of selecting a loan that’s too costly.

For example, some buyers choose an adjustable rate mortgage to receive a lower interest rate early on, but they fail to realize that their rate and mortgage payment can increase in the future. Likewise, some borrowers pick a 15-year mortgage to pay off the debt faster, but then realize that they can’t swing the higher payments after a shift in their income.

2. Overspending on a House
Lenders determine affordability based on the information listed on your credit report and your tax documentation. But sometimes, lenders approve applicants for a loan larger than they can afford.

Rather than being excited and accepting the higher mortgage loan, be smart and stick to your original price range. Splurging on a house provides immediate excitement and gratification – but your mood can quickly turn sour once the bills start rolling in. A big house typically equals expensive utilities, which can affect your disposable income and complicate your financial goals.

3. Skipping the Home Inspection
Home inspections are not required when buying a house, and some sellers can rush the process and discourage an inspection. But buying a house without an inspection is extraordinarily risky because serious problems can exist with the electrical wiring, the plumbing, the roof, or the foundation. An inspector can identify problems before the closing, and you can then ask the seller to fix these problems. If you buy a house and skip the home inspection, you’re financially responsible for any problems that arise after closing.

4. Not Shopping Around
Save money on your first home purchase by simply talking with different lenders. Interest rates and closing costs vary among banks, and if you want the best rate and the cheapest costs, obtain multiple quotes. You don’t have to call 10 different banks, but it’s smart to request no-obligation quotes from at least three different banks or lenders. Compare each quote to determine the best option. Factors to consider include the mortgage rate, closing costs, down payment, private mortgage insurance, and a potential prepayment penalty.

homebuyer

Home Searching Mistakes

First-time home buying mistakes aren’t only money related. Become a savvy buyer and avoid mistakes while conducting your property search.

5. Not Visiting the Property Multiple Times
There’s nothing wrong with bidding on the first house that you see. However, plan to visit the property at least twice before submitting your offer. If a seller is motivated and ready to sell, he or she may rush the process or try to force you to make a hasty decision. But remember, once you sign the closing papers, there’s no turning back.

After the initial visit to the property, go home, sleep on it, and return a few days later. In the meantime, drive through and check out the neighborhood during the weekends and evenings. Are the neighbors rowdy? Is there loud music? Are the children playing in the streets or being noisy? Checking out the neighborhood when the majority of the residents are home can help you determine whether the area is a good fit for you and your family.

6. Limiting Your Search
The majority of buyers have their hearts set on a particular neighborhood or city. But why limit your search area? Some buyers want to live close to their place of occupation, or keep their children in a specific school district. Regardless, it’s worth checking out other areas. It’s possible for your child to excel in another school district, and the extra time that it takes to commute to work may present the opportunity to decompress before arriving home.

7. Not Working With a Realtor
You don’t need a Realtor to buy house – but before disregarding the importance of a buyer’s agent, understand that the seller’s agent has his or her client’s best interest in mind, not yours. They’ll offer you advice and answer your questions, but ultimately, this person is there to serve the seller. For this reason, find your own Realtor.

A buyer’s agent can guide you in the right direction, help negotiate your bid, counter an offer, and organize the closing process. And since the seller pays both agent’s commissions, it only makes sense to have an agent on your side.

Final Word

Buying a house is a stressful and nerve-racking time, regardless of whether you’re a first-timer or a veteran buyer. Unexpected problems can and will pop up – these can include hidden damage found during a home inspection, a low appraisal, and higher than expected closing costs. It’s an unpredictable process, but the more you know about the process, the easier it is to avoid serious mistakes.

What mistakes did you make when buying your first home?

(photo credit: Bigstock)

Valencia Higuera
Valencia Higuera is a personal finance junkie who enjoys reading articles on budgeting, saving money, and credit cards. She has written personal finance articles and blogs for several online publications. She holds a B.A in English from Old Dominion University and currently lives in Chesapeake, Virginia.

Related Articles

  • http://www.moneylifeandmore.com/ Lance@MoneyLife&More

    I bought the first place I looked at but there was nothing else comparable three blocks from the beach in the same price range. I got a steal of a deal and can’t complain.

  • http://www.ohiofha.com/ Ohio FHA Mortgage

    The single biggest mistake that I have to talk to my clients about is overspending. They assume that because lenders will allow debt ratios to 45% (or 57% for FHA loans) that it is a good idea for them to buy a house that pushes their ratios that high. Setting an ideal purchase price up front always helps.

  • http://www.mypersonalfinancejourney.com/ Cherleen @ MPFJ

    One of the biggest mistake in buying a home is skipping the home inspection stage. i have a friend who bought a newly-constructed home without inspecting it. They were made to believe when the agent said that there is no need to inspect the house because the house is newly-built so there should be no problems with it. However, after they moved in and a rainfall, problems started to arise. There were leaks on the roof and waterproofing was not good enough. It was a big mistake on their part.

  • Mzvon88

    Valencia – thanks for the insightful article. Funny I would come across this article now, as I am really praying and hoping for my 1st home right now! I have been diligently researching the internet / library on helpful tips as you’ve written about (all the costs involved, inspections, agents, etc.)
    Unfortunately, although I am above a 670 score I have a couple of old debt items I am fighting now thru a credit firm to remove from my credit reports and/or negotiate amicably, before I can obtain FHA approval I’m finding out. Until that happens, home ownership remains a dream for me.

  • http://www.Everythingfinance.com/ Charlotte@Everything Finance

    Good advice. The one thing I would add is to talk to your family or friends. Bounce your plans off of them. Let them tell you some of their mistakes and help you keep from making them too.

  • http://www.housebuying-tips.com/ Kris B

    Definitely all good advice. And even when working with a realtor and getting the home inspected there are no guarantees. Our realtors stopped doing work when our search dragged on while we waited for the right house (and the fact that I did most of the searching and comps made them feel lazy,I guess). And the inspector missed a few costly things too, we had to complain to the state and he paid for us to get the problems fixed that he missed. So be diligent!

  • http://profile.yahoo.com/FM4MEX2QVYFDSPKGACOYMVH5H4 plain j

    Taking your time in making a decision will help you avoid buyer’s remorse, so think about what you’re doing and try not to rush things.

The content on Money Crashers is for informational and educational purposes only and should not be construed as professional financial advice. Should you need such advice, consult a licensed financial or tax advisor. References to products, offers, and rates from third party sites often change. While we do our best to keep these updated, numbers stated on this site may differ from actual numbers.
Advertising Disclosure: We may have financial relationships with some of the companies mentioned on this website. Among other things, we may receive free products, services, and/or monetary compensation in exchange for featured placement of sponsored products or services. We strive to write accurate and genuine reviews and articles, and all views and opinions expressed are solely those of the authors.
Links monetized by VigLink