10 Major First Time Home Buyer (FTHB) Mistakes
Buying a first home should be many things - a happy time, a huge 
accomplishment, and a step toward financial wealth. What buying a home should NOT be is a mistake, but far too often first time home buyers (FTHB's) make major mistakes along the way, which can cost them at least time and peace of mind, and at worst a TON of money and heartache. Here are some major FTHB mistakes to avoid to help ensure your home purchase is a smart buy toward a happy and succesful future.
Mistake #1 - Looking for homes before being pre-approved
Many home searches start online, and many times people fall in love with homes well above the price range for what they can be approved for. Many FTHB's don't factor things like taxes, insurance, or PMI into online payment calculators, and are left with unrealistic expectations.
Your home search should start off thinking about financing, and not about homes. Shop for a mortgage lender, and get a full blown pre-approval to ensure that when you do find a home you love, the financing won't present a problem.
Mistake #2 - Not taking the mortgage process seriously
Many FTHB focus on finding a home so badly that they don't focus on whether or not they're getting the best loan. Many lenders and loan originators are all too happy to simply quote a program without discussing multiple options and future plans with their clients - this is a major mistake.
Different loans have different costs, both immediate and long-term, so it's important to consider different options and explore the benefits and pitfalls of the various loan programs you may qualify for. Getting a mortgage is often the largest financial transaction people make in their lives, so getting the right loan is paramount to your future success. Make sure your lender and loan originator gives you options, and explains them thoroughly before signing the paperwork.
Mistake #3 - Not planning enough
The home buying process should begin at least a few months prior to making an actual purchase. This is a huge decision, and the importance of planning cannot be overstated. Planning months in advance will allow you to get your finances in order, which includes getting your credit in the best possible shape, saving money, getting pre-approved, and nailing down exactly where and what you want to purchase.
Mistake #4 - Putting too much money down
Yes, a large down payment is beneficial, but in today's mortgage market it's not necessary to put a large sum of money or a high percentage down IF it will leave you strapped for cash or your savings completely depleted. Again, this is where your lender can step in and help you make the right decision. Perhaps instead of 20% down to avoid mortgage insurance, it would be a smarter move to go with an LPMI program and keep some money in the bank. Long term, it may even make more sense to pay points to buy a lower rate than to put additional money down.
After all, if you completely deplete your savings to buy a home, and something goes wrong with the home, how are you going to pay to fix it? If you've got plenty of money, then sure, put down as much as you'd like, but never sacrifice an emergency savings for a larger down payment.
Mistake #5 - Bypassing Inspections/Surveys
Many FTHB, especially those short on cash, consider waiving their rights to inspections when purchasing a home in order to save a few bucks. Some also want to save money by foregoing a survey. Personally, I believe this is ALWAYS a mistake. If a survey comes back drawn exactly as you thought it would be, or an inspection comes back with no issues, it's money well spent for the peace of mind.
Foregoing inspections can lead to disaster - inspectors can prevent maintenance or repair nightmares, legal issues that can arise from improper or non-existent permits, and even minor issues which could strongly affect what you're willing to pay for a home. The investment you make in inspections and surveys are at the very least an investment toward peace of mind, and could potentially be insurance against a disaster waiting to happen.
Mistake #6 - Doing ANYTHING financially without consulting your lender
You're buying your first home. That's exciting, but what's a home without furniture, appliances, or that 75" TV you've been checking out for months that would look PERFECT in your new finished basement? The problem is, many of these purchases can cause delays in your mortgage financing, or in the worst case, disqualify you from a mortgage altogether.
It's best to avoid any large scale purchases until AFTER the purchase of your home. New credit accounts, changes in account balances, and even credit inquiries can all negatively impact your credit, and therefore your mortgage application. It's also best to avoid moving money around without talking with your lender. There are some types of assets and financial activities that disqualify assets from being counted on your mortgage application, so leaving things alone is best to avoid a wormhole of paperwork. If you absolutely need to make a purchase, open a new credit account, or move money around, check with your lender first to ensure it won't cause any issues with your mortgage application.
Mistake #7 - Buying yourself "house poor"
"House poor" is a term describing someone that spends so much on their home that they can't afford anything else. This happens because most lenders focus on how much someone can qualify for, rather than the payments they are comfortable with. Many FTHB hear what they can qualify for and get excited, sometimes not realizing that the payments aren't feasible for the long term.
This mistake is easy to avoid though, thankfully. Working with a good lender, you should be advised to focus on monthly payments that can you afford, rather than the absolute maximum dollar amount you can qualify for. Simply focus on monthly payment, and finding one that you're very comfortable with. Remember, you want to buy a home, but buying a home isn't worth it if you won't be able to enjoy life after your purchase.
Mistake #8 - Not using sellers assitance
Especially right now with rates and the cost of borrowing money extremely low, sellers assistance is a tremendous tool to FTHB. Most loan programs allow sellers to contribute at least 3% of a homes purchase price to a buyer for closing costs, prepaid items, and discount points. If you absolutely NEED sellers assistance to buy a home, you may want to re-analyze your decision to purchase (remember, you don't want to be 'house poor' and you want to have an emergency savings fund), but sellers assistance is something that should be considered by anyone in a market that will allow for it.
Even if you don't need it, and have no problem at all coming up with funds for closing costs, sellers assistance can be used to pay discount points (aka a lower rate for the buyer), pay rate adjustments for LPMI, or by paying closing costs, allow a buyer to put more into a down payment (if it will help reduce the cost of PMI or eliminate it altogether). Whether or not to seek sellers assistance is a decision that your lender and Realtor will be able to help you make.
Mistake #9 - Letting emotion overcome logic
FTHB are usually full of excitement, anxiety, and eagerness. There are so many emotions that come along during the process of finding the right home and working toward settlement. It is important, though, to be logical. Again, this is where working with a great Realtor & lender can be very beneficial. Do not let "Love!" for a home you see overshadow the logic of whether or not that home will be a smart purchase. Look at all of the angles and how the home will fit into your life, both immediately, short & long term. Just because you fall in love with a home upon seeing it, doesn't mean it's a smart purchase.
Mistake #10 - Not considering the future
Many FTHB focus on their immediate needs when looking at a home, and fail to consider the long term. Long term planning, both financially and personally, needs to be done before buying a home. Are pets & children in the picture within a couple years? Are you OK with a home that's a bit too small to do the entertaining that you love to do? These are all things to think about. In the same token, it's smart not to dismiss a home because of immediate problems, either. Perhaps the bathrooms and kitchen are dated - are these things you could remedy within a couple years? If you love the rest of the home and it's a perfect fit, don't let things that can be easily remedied within a relatively short time frame dissuade you completely.
Investing is another consideration to make - if this is a small home you'll be looking to live in for just a few years, is it a property you could easily rent out? Are you even interested in being a landlord or hiring a property management company? Your first home is a big purchase, so long term planning needs to be considered before you choose the right home and the right mortgage loan.
BONUS Mistake - the worst mistake of all
Not hiring a Realtor. Especially on your first home, you want someone that's 100% in your corner. Not only will a Realtor help you find a home and save you a TON of time by finding properties meeting your specific wants and needs, they'll help to ensure you avoid all of the above mistakes and more. A great agent will likely also be able to point you in the direction of other quality services - lenders, inspectors, attorneys, etc - a Realtor is the #1 resource that you'll want to use when buying your first home.
Want to work with a lender that specializes in working with first time home buyers? Give me a call at 484.680.4852. Have a question about buying your first home? Ask an expert here.
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