Key Takeaways

• • • • • • Check your credit report to fix any issues before you start.
          • Get preapproved to know how much you can afford, without using all your savings.
          • Choose the neighborhood before you choose the house, and stay flexible!
          • Compare multiple mortgage offers and explore special loan programs for first-time buyers.
          • Work with a realtor and schedule a home inspection before buying.

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    Buying your first home is exciting, but it’s also one of the biggest and most complicated financial decisions you’ll ever make. While it’s fun to pick out paint colors and think about decorating, there are some important steps to take first. If you know how to avoid common first-time buyer mistakes, you’ll have a much smoother experience.

    Here are some of the biggest pitfalls—and how to steer clear of them.

    Mistake #1—Ignoring Your Credit

    Your credit score plays a huge role in qualifying for a mortgage. Check your credit report to fix any mistakes that could hurt your score. Many banks and credit card companies offer free access to your score. You can also get a free report from Experian, Equifax, and TransUnion at AnnualCreditReport.com. In addition to monitoring your credit, don’t settle for the first mortgage offer you get. Comparing quotes from multiple lenders lets you find the best rates, fees, and terms. Also, avoid applying for new credit cards or loans while shopping for a home—it can lower your score and impact your mortgage options.

    Mistake #2—Shopping without a Preapproval

    Going house shopping without a mortgage preapproval is a big mistake. Knowing exactly what you can borrow narrows your search to houses that are realistic for you to purchase. Once you’re preapproved, decide how much to borrow (just because you’re approved for a high loan amount doesn’t mean you should borrow that much). Preapproval also shows sellers you’re serious about buying.

    Mistake #3—Focusing Only on the House

    It’s easy to fall in love with a house that seems perfect—but don’t forget to think about the neighborhood and surrounding area. Consider schools, shops, commute times, and other factors that affect your quality of life. A great home in the wrong location for you can lead to long-term dissatisfaction. Additionally, working with a real estate agent can help you make smarter choices. Realtors are experts who know the market, neighborhoods, and can help you find a home that fits your needs and lifestyle.

    Mistake #4—Using All Your Savings

    It’s tempting to put every dollar you’ve saved into your home, but you still need an emergency fund. Save some money for unexpected future expenses like car repairs or medical bills. A separate emergency fund will help you avoid falling behind on other payments.

    Mistake #5—Skipping the Inspection

    A home inspection is essential for identifying potential problems before you buy. Look for an inspector who is certified by professional associations like the American Society of Home Inspectors (ASHI) or the International Association of Certified Home Inspectors (InterNACHI). Ask friends and family for recommendations and look at sample inspection reports to choose the best inspector.

    Mistake #6—Believing You Need a 20% Down Payment

    It’s a common belief that you must save 20% of a home’s price for a down payment. While a larger down payment likely means you won’t have to pay Private Mortgage Insurance (PMI), waiting to save 20% could delay your home purchase and other financial goals. You might qualify for special loans with low or no down payments from the FHA, VA, or USDA. Many states also offer first-time buyer programs that include grants, forgivable loans and down payment assistance.

    Welcome Home!
    Avoiding these mistakes can help you make smarter decisions as you buy your first home. Good luck on your journey to homeownership!