Home buying is an exciting, yet complex, process that many Americans go through each year. Purchasing your first home is the biggest purchase and financial decision in your life so far. It is important that you keep a cool head and avoid these 5 common mistakes to ensure you get the best deal possible.


  1. Getting pre-approved for a loan too late (by searching for a home first)

Many first-time homebuyers start searching for a new home before taking with a lender. Searching for a home is more glamorous and fun, but you are wasting your time by not having a pre-approval letter from a mortgage provider.

When getting pre-approved, it is important to give the lender enough time to process your request. Many pre-approvals are straightforward, but some can take as long as 45-60 days. Once you are qualified for a loan, you’ll be able to close faster, which is extremely important in more competitive housing markets.

It can be scary to talk to a lender, since there is always the possibility they you’ll be turned down for a loan. But it is much better for everyone involved to be turned down before spending hours looking at homes and talking with sellers. Once you are pre-approved for a mortgage, you’ll know exactly what you can afford and be able to target your perfect home easier.


  1. Not budgeting beyond monthly mortgage payments

Affording a home means much more than simply being able to pay the mortgage each month. New homeowners are often surprised by all the additional expenses that arise once they move in. In addition to your monthly mortgage payment you’ll also have to budget for property insurance, taxes, homeowners association dues, maintenance, and higher electric and water bills (compared to renting).

The first year in your new home will also be the most costly. There are often necessary repairs that arise that were unable to be caught in a simply home inspection. And when you move in, you want to make sure you have money on hand to customize your new home based on what your family needs.


  1. Putting too much money into the down payment

Another common budgeting mistake is to strictly adhere to the “20% rule” (aka thinking you always need to put down 20% of your home’s value as a down payment). As we talked about above, your first year of homeownership is this most expensive, and you need to make sure your have reserve cash on hand for emergencies or improvements.

Putting less than 20% down is nothing to be ashamed of. While, private mortgage insurance may increase your monthly payments, it can be a great tool to give you peace of mind. Plus, once you pay off 20% of your home in total, you can always refinance to drop your PMI.


  1. Putting too much faith in online information

By now, most people know that just because you see something online, it doesn’t mean that it’s true. Zillow’s Zestimates are famous for being incorrect, often by up to 20% or more. Home information in your local MLS can be famously lacking, out of date or inaccurate.

Be sure to verify all information that you see online. A quality home inspector can save you tons of headaches down the line and verify facts about a property. Also, be sure to use a REALTOR even when buying a home. They can find comparable properties that have sold recently to have a much more accurate appraisal of a home’s true value.


  1. Falling in love with a house

One of the most common mistakes is getting too emotionally tied to a particular property. Strong emotions are the enemy of negotiating, and can cause you to overpay or overlook warning signs of a particular property.

Know that there will always be more homes for you to consider. Being able to walk away from a deal gives your the leverage you need to get a fair deal. So get excited about your potential new home, but check that excitement at the door when examining the details.


So by all means, fall in love with a house, just make sure your do it after closing. Of course, having an experienced buyer’s agent by your side is one of the smartest moves you can make.

A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Closing costs are separated into what are called "non-recurring closing costs" and "pre-paid items." Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. "Pre-paids" are items which recur over time, such as property taxes and homeowners insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the borrower within three days of receiving a home loan application.



Usually refers to a fixed rate mortgage where the interest rate is "bought down" for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower's payment is calculated at the note rate. In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower's monthly payment. These funds usually come from the seller (or some other source) as a financial incentive to induce someone to buy their property.

A "lender funded buydown" is when the lender pays the initial lump sum. They can accomplish this because the note rate on the loan (after the buydown adjustments) will be higher than the current market rate. One reason for doing this is because the borrower may get to "qualify" at the start rate and can qualify for a higher loan amount. Another reason is that a borrower may expect his earnings to go up substantially in the near future, but wants a lower payment right now.

The loan payment consists of a portion which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time.

The date the interest rate changes on an adjustable-rate mortgage.

A clause in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender.