9 First-Time Home Buyer Mistakes to Avoid

Buying real estate can be just as stressful as it is fun. If you're a first-time home buyer, it's really hard to know all the right questions to ask. To help you out, here are some mistakes to avoid as you work to make your first home purchase happen.

1. Assuming you won't qualify for a mortgage

You don't need a huge salary or big bank account balance to qualify for a mortgage. Lenders love borrowers who keep their debt low and pay their bills on time. It's a good idea to come to the table with some money set aside, but you might not need tens of thousands of dollars for a down payment. Look into top-rated mortgage lenders that will help you find a loan that fits your needs.

2. Assuming your credit is fine

You don't need perfect credit to buy a home. In fact, it's possible to get a mortgage with bad credit. But you'll pay more because the best mortgage interest rates go to people with higher credit scores.

That's why it's so important to stay on top of your credit score. The three major credit bureaus typically provide one free credit report each year. But until April 2022, you can get yours for free each week by visiting annualcreditreport.com, so check yours often. And if you find any discrepancies, you may be able to easily request a correction.

If you need more help, read our guide to learn how to increase your credit score.

3. Not saving any money

Even if you qualify for a mortgage with a low down payment (or even no down payment), you will need to have some money in the bank to qualify. Some lenders want to see just one month's worth of funds in your savings account. Others want to see three months' worth. Although you can use this money any way you want the minute after your loan closes, you won't be able to use it toward the down payment or closing costs. It's a separate requirement called cash reserves.

To help you get ready, use our guide for how to save for a house.

RELATED: Need a savings account? Check out The Ascent's guide to the best savings accounts.

4. Underestimating homeownership costs

As the owner, you're going to be responsible for every expense related to the home. Right away, you'll need to budget for homeowners insurance premiums and property taxes in addition to the monthly payment on your loan.

If you make a down payment smaller than 20%, there's a good chance you'll be paying for private mortgage insurance (PMI). With an annual premium usually set at between 0.5% and 1.5% of your loan balance, your PMI could run anywhere from $83 to $250 per month on a $200,000 loan.

Then you've got homeowners association (HOA) fees, a longer list of utilities, and maintenance expenses to factor in.

Being a homeowner costs a lot. You'll need to think way beyond the loan payment to come up with a realistic homeowner budget. A first-time home-buyer class can help walk you through that process.

For more information, read our guide on the expenses of homeownership.

5. Shopping with an unrealistic budget

After you set your price range for a home, your lender or real estate agent might tell you that you can afford more than what you've decided will work for you. That may not be a good idea.

You're going to want to meet all of your financial obligations as a homeowner and still have money left over to save every month. Go with your own calculations and stay in your financial comfort zone. You won't regret having extra money in the bank, and you can always plan to upgrade to a nicer home in a short time or do a major remodel down the line.

To help you out, make sure to read our guide on how to create a first-time homeowners' budget

6. Applying with only one lender

You'll do yourself another big financial favor when you shop around with multiple lenders. Even a fraction of a difference in a mortgage rate from one lender could save you thousands of dollars or more over the life of the home loan. Besides the interest rate, lenders also differ in the fees they charge. For example, some charge an application fee while others offer free mortgage pre-approval.

Applying with multiple lenders helps you compare apples to apples. And it won't hurt your credit score as long as you apply for all of them in a short time frame. All mortgage applications made within a rate shopping window are counted as a single inquiry against your score. The rate shopping window is 14 to 45 days, depending on the credit scoring model used by the lender.

For more information, we've rounded up the best mortgage lenders for first-time homebuyers.

7. Confusing pre-qualification with pre-approval

Pre-approval and pre-qualification are each appropriate at different times in the home-buying process.

If you are just starting to entertain the idea of buying a home, a mortgage pre-qualification will tell you what loan amount you might qualify for, assuming everything you tell the lender about your finances and credit is accurate.

When you're ready to view homes, get pre-approved. The mortgage lender will verify your information and tell you what you do qualify for. When you find the home you want, the lender will update the data and make sure nothing has changed, including your credit score, your debt balances, and the amount of money you have in savings. Assuming your financial situation has not worsened, your loan will be approved.

If you need more help, our guide on how to get pre-approved can walk you through each step of the pre-approval process.

8. Assuming you need a big down payment

Arguably the biggest obstacle to homeownership for most people is the down payment. However, there are several ways for a first-time buyer to remove or lower this hurdle, including a zero-down mortgage or down payment assistance (DPA).

Both a VA loan and a USDA loan allow for a zero-down payment. VA loans are for eligible service members, veterans, and some spouses. USDA loans are for low- to moderate-income borrowers buying property in eligible locations, which are usually rural.

Down payment assistance offers a down payment loan (payments are deferred or the loan is later forgiven entirely), or a non-repayable grant (free money).

If you can't get a zero-down mortgage or down payment assistance, look into 3% down payment loans. And if you don't qualify for those, an FHA loan requires only 3.5% down.

For more information, check out our home buyer checklist for everything you need to do before buying a home.

9. Letting emotions take over

The home-buying process can be stressful, and things might happen that you weren't expecting. It's not uncommon for first-time home buyers to be outbid and outmaneuvered by investors and other buyers. Your home budget might need to be adjusted, and it can be dejecting to find out that you need to save even more money. You might fall in love with a home that you don't get to buy.

Relax. Take your time. Do the math before you make an offer on a house, and stick with your goal. Persistence will eventually pay off, and you'll learn a lot along the way. And to help you stay the course, use our guide on how to get a mortgage.

Still have questions?

Here are some other questions we've answered:

• Beginner's Guide to Mortgages
• First-Time Home Buyers Guide
• How to Create a First-Time Homeowners’ Budget