6 First Time Home Buyer Mistakes to Avoid

For first-timers, the home buying experience can be both thrilling and terrifying. It’s a huge milestone in life, and likely the culmination of years of hard work. However, without prior experience, it’s easy to make many common first time home buyer mistakes that could lead to long-term repercussions.

For starters, 6 of the biggest first time home buyer mistakes occur when buyers:

  1. Choose the Wrong Lender
  2. Accept a Bad Mortgage
  3. Mismanage Credit 
  4. Make a Poor Home Choice
  5. Exceed Budget
  6. Miss out on Available Help

 

Ready to buy your first home but don’t want to make a costly mistake? Keep reading this article to learn more about each mistake and how to avoid it. Then you can embark on the home buying journey with a sense of security.

 

1. Choose the Wrong Lender

Your lender plays a huge role in what you end up paying for a home long-term, so the lender choice is no easy decision. 

The biggest red flag to beware of is a lender who pressures you to make decisions and does not explain to you the reasoning behind their financial recommendations. 

To avoid this mistake, give yourself options. You can do this through consideration of more than one lender. The search can be time-consuming, but you will save yourself frustration in the future through a sound decision made now. 

 

What to Look for in a Lender 

Now that you know what not to look for, here is what you do want in a lender. The right lender will:

  1. Explain the “why” behind their recommendations
  2. Welcome and fully answer your questions
  3. Give you ample time to think and make decisions

 

You deserve to be 100% confident with your decisions, so there is nothing wrong with careful selection of a lender. After all, you are the one paying for a new home, so you deserve to be well aware of your options and the numbers attached.

Now that you know how to choose the right lender, you’ll also need to be cautious with the kind of mortgage you accept. Let’s take a look at the common pitfalls of first time buyers when it comes to mortgages, and how to make the right choice.

 

 

2.  Accept a Bad Mortgage

It can be difficult to know what a “good” versus “bad” mortgage is, especially as a first time home buyer. 

A common misconception is that you must make a 20% down payment on a home. However, the reality is that the median downpayment for first time home buyers is only 6%.

Overpayment and underpayment could hurt you long term. If you pay too much for a mortgage upfront, you may wait longer than necessary to buy a home, or you could even drain crucial savings. On the other hand, paying too little upfront may burden you with higher debt for years to come. 

The good news is, there are steps you can take to ensure that you accept a good mortgage. 

 

How to Choose a Good Mortgage 

Every home buyer’s financial situation is different, so there is no one rate or percentage that is best for everyone. Rather, focus on finding your happy medium.

You can find a mortgage that is right for you through:

  • Consideration of more than one mortgage option (Never blindly accept the first mortgage offered to you)
  • Comparison of rates and terms and how different plans would impact you long-term
  • Guidance from a trustworthy lender 

 

A mortgage isn’t the only pothole on the path to a new home. First time home buyers are also at risk if they mismanage credit, which is our next critical mistake. Let’s take a look at common credit mistakes and how to avoid them.

 

3. Mismanage Credit 

Your credit report is a big factor in whether or not you receive a pre-approval from your mortgage lender. Your credit indicates to the lender whether or not you are financially able to pay your mortgage.  

Carelessness when it comes to credit management can jeopardize your chance at the new home you really want. It takes smart credit management to be successful in the home buying process. 

 

Credit Management Best Practices

To manage credit well, don’t make any major changes to your finances in the period leading up to applying for a mortgage through closing. Changes to avoid include:

  • New Credit Cards
  • Closure of Existing Accounts
  • New Loans
  • Large Purchases


Additionally, traditional credit score best practices apply here. So pay your bills on time and in full monthly, and continually monitor your credit score to prevent errors. Then, you will be in a great place to receive the pre-approval you need and the rates and terms you want.

 

4. Make a Poor Home Choice

With so many factors in the decision, it’s paramount to be aware of common slip-ups related to navigation of all the options for a new home. 

When it comes to the home search, some of the most common first time home buyer mistakes happen when buyers:

 

Decide Based on Emotion

While it’s great to be excited about a new home, it’s important to keep a focused mindset, to avoid an impulsive decision. You will likely feel the regret of a poor, in-the-moment home decision much farther down the line than the thrill of a spur-of-the-moment decision.     

 

Expect Perfection

There is no such thing as a perfect home, and impossible standards could keep you from accepting an otherwise great offer. So keep your standards high, but not so high that you will never find a home, or that you become unable to make a decision. 

 

Forget to Consider the Neighborhood

With so many details to consider – room number, square footage, layout, renovation ideas – it’s easy for first-timers to get so caught up in the details of the house that they forget to even think about the neighborhood that they will be moving into. 

You want to make sure that the values of your new neighbors will align with yours, and that the amenities of the surrounding area will meet your needs, so consider features like:

  • School District
  • Environmental Factors
  • Crime Statistics
  • Proximity to Leisure Activities (Parks, shops, restaurants, entertainment, etc.)


As you prepare to make your big decision, you will also want to keep in mind the next detrimental mistake, which happens when buyers exceed their budget.

 

5. Exceed Budget

It can be easy to fall in love with a home that you simply can’t afford. 

However, it’s unwise to go over budget. If you overspend, you could drain important savings for other aspects of life, or even risk foreclosure.

Keep in mind that your pre-approval is only an estimation of how much house you can afford. It does not represent your whole financial situation. Before you decide how much to spend on your mortgage, for example, take a step back and factor in other important expenses into your decision, including:

  • Groceries
  • Utilities
  • Health Insurance
  • Retirement
  • Child’s Education Fund
  • Vacations
  • Closing Costs
  • Maintenance

 

Take the time to make a smart budget, keep the long term in mind, and plan for all of life’s important expenses. You will thank yourself later.

Now, this may seem like a lot to take on. And you’re right, it is. But thankfully there is a lot of help out there for first time home buyers like you. 

Unfortunately, many people simply fail to take advantage of the help that could be the difference between a failed home purchase and a successful home purchase. Keep reading to learn about commonly overlooked sources of help and how you can utilize them.

 

6. Miss Out on Available Help

As a first time home buyer, you may not be aware of the many tools out there to help you navigate the complicated home buying process with security and confidence. Let’s look at a few of those tools.

 

Escrow

If one thing is for certain, it’s that the home buying process is complicated. It involves a lot of important decisions, agreements, and documents. But, you don’t have to handle it all on your own. Introducing escrow!

Escrow is a neutral third party that holds money, titles, personal property (or anything of value) until all transactions are successfully completed. 

 

How escrow helps alleviate first time home buyer mistakes

 

For an added sense of security and transparency in your home buying process, try escrow

 

Loans

Don’t assume that there aren’t any loans out there for you, or you could miss out on progress made in the home buying process. 

Even if you don’t have the best credit score or the biggest savings account, there are loans out there that offer help through lower down payments and more forgiving credit score requirements. There are also loans that support certain groups.

Check out the following loans to see if you qualify:


A loan could be your key to moving forward in the home buying experience.

 

Real Estate Agent

A real estate agent is essentially an expert in the home buying process, and their wisdom and guidance could change the game for a first time home buyer, so don’t overlook this option for help.

 

Avoid First Time Home Buyer Mistakes with New Venture Escrow

The home buying process is complicated, but we are here to help you navigate it with confidence and security!

Contact us to learn how our top-tier escrow services can help you protect your assets, meet sensitive deadlines, and have peace of mind along the way.

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