First-Time Home Buyer Tips: Six Pitfalls and How to Avoid Them

1. Falling in love before you’re pre-approved

It’s easy to find a house online and picture yourself living there. But if it’s outside your budget, or you learn later that you need a different loan, that can mean disappointment or a rushed decision.

Instead: get pre-approved first. You’ll know your price range, and sellers will take your offer more seriously. Our guide to preparing for your first conversation with a loan officer covers what to bring.

2. Stretching your budget too far

The amount a lender approves is the most you can borrow, not necessarily what you should spend. A payment that looks fine on paper can feel tight once utilities, repairs and everyday life are added.

Instead: build your own budget and shop at the number you’re comfortable with. Our guide to budgeting for your first mortgage walks through it.

3. Forgetting the costs beyond the payment

First-time buyers often plan for the down payment and forget the rest:

• Closing costs, which your Loan Estimate itemizes
• Moving costs and furniture
• Repairs and maintenance, now your responsibility instead of a landlord’s
• Mortgage insurance, on some loans with smaller down payments

Instead: ask your loan officer for an estimate of your total cash to close, and keep an emergency fund separate from it.

4. Skipping the inspection

An appraisal confirms the home’s value for the lender. It isn’t a full inspection. A home inspector looks at the roof, foundation, plumbing, electrical and more, and can find problems that cost thousands to fix.

Instead: schedule a home inspection, and ask your agent whether other inspections make sense for the property, such as a sewer or septic inspection, radon testing or a well water test.

5. Not comparing loan options

Many first-time buyers assume there’s only one type of loan, or that they need 20% down. Depending on your situation, FHA, VA, USDA and conventional loans may each be worth a look, and some allow much smaller down payments.

Instead: ask to see more than one option side by side. Our guide to choosing the right home loan compares them.

6. Making financial changes before closing

Between pre-approval and closing, your lender may re-check your credit, income and accounts. A new car loan, a new credit card, a job change or a large unexplained deposit can delay or change your approval.

Instead: keep your finances steady until after closing, and call your loan officer before making any big change.

A few more tips

• Think about the next five to ten years. Will the home still fit if your family, job or commute changes?
• Look into down payment assistance. Many states offer programs for first-time buyers. Your loan officer can tell you which programs are available in your state.
• Ask questions. Nothing about a mortgage should be a mystery when you sign.

This article is general information, not an offer to lend or a commitment to lend. All loans are subject to credit approval, underwriting and property valuation. Belem Servicing LLC, NMLS ID #715386 (NMLS Consumer Access).

Sources

• Consumer Financial Protection Bureau, Loan Estimate explainer
• Consumer Financial Protection Bureau, Owning a Home