15 Mistakes Not to Make as a New Homeowner

If you're planning to become a new homeowner soon, you're about to enter into a major commitment that will affect your life for years to come.

Owning a home can be rewarding and can help you to grow your net worth as you build equity and benefit from property appreciation. But there are some mistakes you cannot afford to make if you want the buying process to go smoothly and don't want your house to hurt your finances. There are 15 errors, in particular, any soon-to-be or new homeowner needs to avoid.

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If you're going to become a new homeowner for the first time, chances are you aren't very familiar with the purchase process. If that's the case, working with a skilled real estate agent can be smart.

Your agent can help you understand what to look for in a property and whether it is priced fairly. They can guide you through making an offer and help you to get the deal done. And best of all, the seller will pay their commission, so there's no direct cost to you.

ALSO READ: How to Find the Best Real Estate Agent for You

Your credit score plays a huge role in whether you get a mortgage and what interest rate you have to pay. Be sure you check your credit report to confirm there's no inaccurate information that lowers your score. Checking your credit can also alert you to any problems, such as missed payments, that could be a red flag for mortgage lenders.

While it may be tempting to buy the biggest and best house out there, stretching to buy a home isn't a good idea.

If you purchase a property at the top of your budget, you may be unable to do other things with your money. It also raises the risk that you won't be able to keep making payments. To avoid spending too much, aim to keep total housing costs below around 25% of your income.

ALSO READ: 69% of Homeowners Feel 'House Poor.' Did You Buy Too Much House?

There are several kinds of mortgage loans: government-backed loans, such as those from the FHA, VA, and USDA; and conventional loans without government guarantees. There are also different mortgage term lengths, and you will need to choose between a fixed- or adjustable-rate mortgage.

You'll want to research all these options, weigh the pros and cons of each, and make an informed choice before committing to a loan you'll be paying for decades to come.

There can be wide variation in loan costs and terms among lenders. If you don't shop around to get several quotes, you may find yourself paying much more than you should. Ideally, you should get quotes from a minimum of three mortgage lenders to confirm you're getting the best deal.

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Once you've decided which lender you want to borrow from, you should go through the pre-approval process. This involves providing all your financial details and getting a preliminary loan approval. Pre-approval helps you set your budget, maximizes the chances your offer will be approved since sellers know you can most likely get financing, and it can help you close more quickly on a home.

ALSO READ: Get Pre-Approved for a Mortgage Today!

You should aim to put 20% down on a home if you can -- although this can be hard as a first-time homeowner. A 20% down payment enables you to avoid private mortgage insurance (PMI), which protects only the lender from loss in case of foreclosure -- and you must have it if your down payment is less than 20%.

If you can't put down 20%, make sure you don't put down so little that you run the risk of ending up owing more than your home is worth. This is a huge problem because it means you couldn't sell or refinance without bringing extra cash to the table to pay off your lender.

Closing costs can total between 2% and 5% of your loan amount. They are expensive. And ideally, you will pay them up front rather than adding them to your mortgage loan and paying interest on them over time.

Be sure you're prepared for this expensive and have money saved, so it doesn't come as an unpleasant surprise.

ALSO READ: What Are Closing Costs?

When you're a first-time homebuyer, picking the perfect house can be hard. Often, you end up focusing on the wrong things, like the aesthetics of the house alone.

The reality is paint and even cabinets and flooring can be changed. But what you cannot change is your commute, the floor plan, the neighborhood, and the school district. So, be sure to focus on these factors that can have a huge impact on your long-term happiness.

When you see a house you're interested in, you may not want to put in an offer immediately to avoid seeming too eager. At the same time, waiting too long could mean someone else gets their offer approved before you have a chance to act.

How quickly you should put in an offer depends on your market, so be sure to talk with your real estate agent to determine the best timeline.

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When you make an offer to buy, you typically want to make it contingent on a few things happening first. For example, you should make a satisfactory home inspection and a home appraisal pre-conditions of the sale. That way, you won't end up buying a money pit, overpaying for a home, or struggling to get a loan because the home didn't appraise for enough.

ALSO READ: 4 Questions to Ask Before You Waive a Home Inspection

As a new homeowner, chances are good you're going to be surprised by all the new expenses you'll face.

You won't just have a mortgage payment but will also need to cover property taxes and home insurance. You'll have HOA fees to pay if you are in a neighborhood with a homeowners association (HOA). And you must be prepared to pay for maintenance and repairs as well. Be sure to consider these costs when deciding whether you're ready to buy a home and how much to spend on it.

You absolutely must have an emergency fund as a homeowner. You should have money saved for emergencies, such as unexpected repairs that crop up. And your emergency fund can also help you avoid foreclosure if your income drops.

Try to save up enough to cover three to six months of living expenses before you move forward with buying a house.

ALSO READ: Your Emergency Fund: How Much Do You Need to Save?

Homeownership comes with a lot of added responsibility. Not only will you need to tackle maintenance and repairs but also ongoing tasks such as cleaning the gutters, mowing the loan, and taking care of snow removal. Be sure you have the time and money to handle these jobs.

Finally, you'll want to be sure you're buying a home for the right reasons since it's a big commitment. Don't buy just because you got married, feel like it's what you're supposed to do, or because your family is pressuring you. And don't buy assuming it's a good investment since, even if your property goes up in value, you won't be able to cash in your profits until you sell.

Buy a property only if it's the right time for you and something you truly want to do.

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If you want to be happy with your home -- and maintain your financial stability once you've moved in -- it's important to do all you can to avoid these errors. Fortunately, now that you know these common mistakes, you can avoid falling victim to them and regretting your real estate investment over the long term.

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