First-Time Home-Buyer Mistakes

You’ve dreamed of buying a house, and now it’s finally time. How exciting! You can already picture life in your new home, right?

Maybe you imagine chasing your kiddos barefoot through the sprinkler on your lawn. Or having all your single friends over for parties. Or hosting Thanksgiving dinner for the first time.

Whatever your vision, you see your home as a blessing—not a curse. But countless people regret the mistakes they made when buying a house.

You need to beware of first-time home-buyer mistakes, so you can protect yourself, your finances and your family. Here are the 17 biggest home-buying mistakes and how to avoid them.

First-Time Home-Buyer Mistakes to Avoid

We’ll start with the biggest home-buying mistake ever. If you’re house shopping and you’re about to do this, stop right now. Don’t even finish reading this article—just get to work fixing this! Here it is:

1. Buying a House When You’re Already in Debt

Now, you might be thinking, Are you serious? Yes, we are. Debt weighs you down. When you have to fork over hundreds (or thousands) of dollars every month on debt payments, you’ll either spend forever saving a down payment or you’ll have to take out a bigger mortgage.

See how much house you can afford with our free mortgage calculator!

Plus, you’re piling that mortgage on top of student loans, car loans, credit card bills and other debts—putting you one emergency away from being unable to pay your mortgage.

Paying for a house when you’re in debt is like trying to run a marathon with weights chained to your legs. Making it to the finish line will be a struggle. And you’ll end up way behind on your other money goals—like retiring, traveling or paying for your kids’ college—because all your income will be tied up in debt payments.

Instead, push pause on the house for now and dump the debt that’s holding you back. Then shore up your savings so a broken car or broken arm won’t wreck your house hunt. When that’s done, you’re ready to buy a house.

Home-Buying Mistakes About Mortgages

Now, some weirdos save up enough to pay cash for their house. That’s fantastic! We love that kind of weird! But if you’re like most people, you’ll probably take out a mortgage—and there’s a whole slew of mortgage-related home-buying mistakes.

Here’s what they are and what you can do instead.

2. Buying a House You Can’t Afford

Many first-time home buyers (and even repeat buyers) say, “Sure, this house costs more than I planned to spend. But it’s perfect! I’ll just take out a bigger mortgage.”

Bad idea! Taking on more mortgage than you can afford is like dropping an atomic bomb on your finances. You’ll wipe out all your other money goals (say goodbye to that vacation you planned). You may even struggle to pay bills and put food on the table. That’s not what you want. When life happens, you need some wiggle room in your budget!

So before you look for your dream home, figure out how much house you can afford. Here’s how you know you can afford it: Your monthly mortgage payment should be 25% or less of your take-home pay—including property taxes, homeowners insurance, private mortgage insurance (PMI) and HOA fees.

Try our mortgage calculator to see what your monthly payment could look like based on your budget.

3. Making Too Small of a Down Payment

Lenders often push home buyers (especially first-time buyers) toward mortgages that require little to nothing down. The problem is, you’ll pay thousands of dollars in extra interest and fees.

Don’t make that home-buying mistake! Saving for a down payment is more work up front, but it’ll save you tons of money long term.

So how much should you save?

Ideally, you should put down 20% of your home’s total value. That may seem like a lot, but putting that much down means you won’t have to pay private mortgage insurance (PMI). Those monthly fees can add up quickly, and you’re only paying to protect the lender in case you stop making payments—it’s not insurance for you!

If you’re a first-time home buyer and you’re ready to buy—that means you’re debt-free and have a full emergency fund with 3-6 months’ worth of expenses—a 5–10% down payment is okay too, but be ready to pay PMI. And stay far away from FHA and VA loans and all their fees!

4. Skipping Mortgage Preapproval

When you apply for a mortgage, lenders don’t just hand you the money. There’s a whole approval process, and you should go through it before you start shopping.

Why? Picture this: You find your dream house, so you rush to the lender and apply for a mortgage. Too late! The seller chooses another buyer who has a mortgage preapproval letter.

A mortgage preapproval letter tells the seller you're serious and speeds up the paperwork. So getting preapproved (not just prequalified) gives you a leg up on the competition. Trust us, it’s worth the time! Ready to get preapproved? Talk to our friends at Churchill Mortgage.

5. Assuming You Need a Credit Score to Get a Mortgage

Okay, this one will blow your mind: You don’t need a credit score to get a mortgage!

In fact, credit scores are dumb. They have nothing to do with how much money you make or how much you have saved . . . and those numbers matter most! You don’t need a credit card payment to build your credit score to get a mortgage—you need cold, hard cash.

Besides, you can buy a house without a credit score through a process called manual underwriting. That’s when a mortgage underwriter looks at your income and net worth to decide how much you can afford to pay every month. Then they’ll create a custom mortgage quote based on the money you actually have—not the money you owe.

6. Getting the Wrong Mortgage

To put it bluntly, most types of mortgages suck. That goes for adjustable-rate mortgages (ARMs), FHA, VA and USDA loans. Lenders use these mortgages to get you into a house for as little up front as possible so you feel like you’re getting a good deal. Then they can charge you tons of interest and fees.

Just do the math, and you’ll think twice about paying tens of thousands of dollars more for a home with these mortgages.

So, what’s the right kind of home loan? A 15-year fixed-rate conventional mortgage. You’ll pay less interest and fewer fees with a 15-year fixed-rate conventional loan than with any other mortgage. And you’ll pay off your home faster! (And even though the monthly payment is higher, a 15-year mortgage is way cheaper than a 30-year loan in the long run too!)  

Oh, one more thing: Different lenders charge different interest rates and closing costs. So when you’re shopping for a mortgage, get multiple quotes to see who’ll give you the best deal.

7. Asking Someone to Cosign Your Mortgage

Getting someone to cosign your mortgage is a serious home-buying mistake. In fact, never cosign anything. To explain why, we asked one of our Facebook fans if we could share her experience. She said yes, so here goes:

In her early 20s, Natty wanted to be like her homeowning friends, so she bought her own place. Since she had $100,000 in student loan debt, she needed her mom to cosign the mortgage for her.

Between her student loan payments and living expenses, Natty quickly realized she couldn’t afford the house. But she didn’t want to stick her mom with the mortgage. “I ended up having to work six days a week to afford the house,” she told us. “I lived in a four-bedroom house for nearly two years [and it was] completely unfurnished. [I had] no money for furniture.”

Natty eventually had to rent out her home and move back into her parents’ house. She was lucky—cosigning can ruin relationships and leave you with nowhere to go. (Think about it: You’re asking the people closest to you to risk their own homes and dreams so you can get a house before you can truly afford it.)

All that to say, if you can’t buy a house without a cosigner, you can’t afford a house. And that’s okay. Just be patient and make a plan to get there as soon as you can. You’ll be so glad you protected your financial future (and your loved ones) by postponing your purchase.

8. Buying Mortgage Points

Your lender might suggest buying mortgage discount points to lower your interest rate. Don’t do it—it’s a trap!

With points, you pay part of your interest up front instead of over the life of the loan. But they typically aren’t worth it. Most buyers refinance, pay off or sell their homes before they reach their break-even point.

Rather than buy mortgage points, put that extra money toward your down payment to reduce your total loan amount. (That’ll cut down on interest too.) And a 15-year mortgage will also help you save on interest—they usually have lower rates.

Home-Buying Mistakes While House Shopping

House shopping is a process, y’all! There’s a lot to learn, especially for first-time home buyers. Mistakes are bound to happen, but we hope we can help you skip the big ones, like these.

9. Shopping Without a Real Estate Agent

With so many real estate apps and websites available, you might think you don’t need a real estate agent to buy a house. But real estate agents do a lot to help you, like:

• Getting inside info on your local housing market
• Looking for homes on databases you can’t access, like the Multiple Listing Service (MLS)
• Helping you make an offer, negotiate the home price, and file paperwork

See why nearly 90% of home buyers used a real estate pro last year?¹ Plus, the seller usually pays your agent’s commission, so you get all these benefits for free!

You need an experienced agent on your side as you navigate the home-buying process, and you shouldn’t just choose the first one you talk to. Try interviewing at least three agents, then pick the one you’re most comfortable with.

This will likely be the biggest purchase you make in your life, and you don’t want it in the hands of someone who acts like a slimy used-car salesman—or your Aunt Kim’s neighbor Chuck who just got his real-estate license.

You can connect with top-performing, RamseyTrusted real estate agents near you through our free Endorsed Local Providers (ELP) program.

10. Choosing Style Over Structure

Don’t let minor cosmetic issues scare you away from a good house. That’s a rookie home-buying mistake! Your new home may not look exactly how you imagined on closing day, but that’s okay.

When you know what to look for when buying a house, you can ignore small defects and focus on what really matters. For example, ugly paint, old carpet and bad landscaping are easy and fairly cheap to replace—so who cares?

Instead, watch out for things that are difficult or impossible to fix. If the floor plan won’t work for your family today, it’ll be even worse in five years. And what if the roof, foundation and plumbing all need repairs? Don’t waste money on a house with bad bones—and don’t get stuck with more renovations than you can afford.

11. Ignoring Resale Value

Your new home’s resale value may not seem important now, especially if you think it’s your forever home. But here’s the reality: “Forever” lasts eight years for most homeowners.² Then, they’re ready to sell.

So even if you think you’ll stay awhile, remember life and circumstances can change. You might find yourself in a situation where you need to sell, so imagine how that’ll play out.

Here are some tips:

• Study the neighborhood. Do you feel safe? How close is it to relatives and work? Does the community offer activities you enjoy? And what are others in the neighborhood doing? If you see boarded-up businesses and empty houses, find out why people seem to be moving out.
• Ask what developments are planned for the area. Some (like adding city water, sewer or gas lines) add value to your property. Others (like a highway cutting through the yard or a nearby trash dump—yuck!) lower property values.

12. Buying a Home Without an Inspection

A home inspection only costs a few hundred bucks, and it’s money well spent! An inspection gives you a thorough report on a home’s structure and electrical, plumbing, and heating and cooling systems to help you spot potential problems.

If the inspection turns up anything wacky, you can decide if you want to buy the home as is, negotiate with the seller to fix problems, reduce the price, or even walk away from the deal. But if you already bought the place? You’re likely stuck with it—even if it sucks.

13. Sticking With a Bad Deal

When you’re house shopping, a sweet deal can quickly become a big mistake. Your home inspector could find mold. The seller could overcharge you. You may even go through a major life change—like losing a loved one or getting a new job in another town—that makes now a bad time to buy.

But when a deal turns sour, many people make a huge home-buying mistake: They stick with it anyway. They’re so afraid of not getting a house, they’ll buy the wrong house! Then they’re committed to a situation they don’t want to be in—for years. Walk away before that happens!

Walking away can be tough if you think you found the perfect home. But it’s not perfect if you’re losing sleep or feeling sick over it. That’s not first-time buyer’s nerves—that’s your body telling you to walk away from a bad deal!

Don’t wind up letting your dream home become a nightmare by sticking with a bad deal and overpaying for a house with problems. Use your power to walk away. Either the seller will negotiate and give you a better deal, or you can keep looking until you find a home you feel good about buying.

14. Taking on Credit While Closing

Remember: Buying a house when you have debt is home-buying mistake #1. And taking on new debt while you’re buying a house is no different! Getting a loan or credit card changes your credit score, which sends your mortgage approval back to the drawing board and delays the closing process.

Now, we’d love it if you paid off all your debt and didn’t even have a credit score (yes, you can live without a credit score). But if you have one, now’s not the time to change it.

Save yourself the trouble and maintain your finances from preapproval to closing. Don’t do anything that could change your credit history. And while you’re at it, be up front with your lender about all your payment obligations (like child support). Otherwise, these issues could change your debt-to-income ratio and make buying a house take longer.

Home-Buying Mistakes at Closing and Beyond

15. Keeping Closing Costs and Moving Expenses Out of Your Budget

Your down payment isn’t your only home-buying expense. 

Closing costs can be anywhere from 2–7% of your home’s value.³ For a $300,000 home, that’s another $6,000–21,000 you’ll pay to third parties like the home inspector, appraiser and title attorney.

Now, some sellers may help cover closing costs—but others won’t. Be prepared to cover these costs yourself so you aren’t scrounging for the cash you need at closing.

Also, don’t forget moving expenses! The average cost to move less than 100 miles typically ranges from $900 to $2,400.⁴ Plan for these costs, and don’t cheat by stealing from your down payment amount or emergency fund. You’ll need those!

16. Forgetting About Title and Homeowners Insurance

Skipping title insurance is another nasty mistake when buying a house. Here’s why you need this stuff:

Imagine you close on a nice house. Two years later, the previous owner's crazy Cousin Eddie appears out of nowhere and claims they left the home to him in their will. Now there’s a big legal problem because it’s unclear who owns the house—you or Eddie! But if you have title insurance, the insurance company will pay Eddie to walk away, and you can keep enjoying your new home.

You’ll also need homeowners insurance to cover the costs of replacing your belongings and rebuilding your house after a disaster—in fact, mortgage lenders require it. But as a first-time home buyer, it’s easy to make mistakes if you don’t know what coverage to get.

Talk to a trusted insurance professional who can help you find the right policy. They can also help you bundle your home and auto insurance to save money, as well as check your coverage each year to make sure it’s still enough.

17. Being Unprepared for Ongoing Homeownership Costs

After buying a house, you’ll have to pay certain costs as long as you live there—like property taxes and HOA fees. At first, you’ll likely pay these expenses as part of your mortgage. But after you pay your mortgage off, you’ll need to budget for these items separately.

Plus, it’s only a matter of time before your home needs repairs—especially if it’s older. So don’t make the mistake of spending all your savings when you buy a home. You’ll need some money left to fix stuff.

That’s where your emergency fund of 3–6 months’ worth of living expenses comes in. It’ll cover emergencies after you move in, like a busted water heater.

Another tip: Plan ahead and budget for renovations. After all, they’re not emergencies because you can see these expenses coming. So prepare and do a little at a time, paying cash the whole way.

How to Buy a Home the Smart Way

Avoiding the biggest home-buying mistakes will save you thousands of dollars and thousands of headaches, but there’s more to buying a home the smart way. Get started with a step-by-step plan to making a smart home purchase in our free Home Buyers Guide.

But hey, since we like you, we’ll go ahead and tell you the biggest secret to home-buying success: Work with a top-notch real estate agent!

We recommend Endorsed Local Providers (ELPs) because they’re high performers in their industry and they’re on a mission to serve you with excellence—even if that means less money in their pockets. That’s why we call them RamseyTrusted.

Meet a RamseyTrusted real estate agent today!

Frequently Asked Questions

Will Millennials Be Able to Buy a House?

Yes—and they do it all the time! Millennials actually made up the largest share of home buyers in 2022, according to a report by the National Association of REALTORS®. Sure, you might get sticker shock while house hunting. But buying a house as a millennial is possible.

To feel confident, millennials need to get serious about saving for a house. Ideally, you’ll want to save a down payment of at least 20% of the home price to avoid private mortgage insurance (PMI).

For first-time home buyers, a smaller down payment like 5–10% is okay too. But then you’ll have to pay PMI. Whatever you do, never buy a house with a monthly payment that’s more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage (which has the overall lowest total cost). And stay away from expensive loans like FHA, VA and USDA.

What Is the Process of Buying a House?

Here are the basic home-buying steps: Determine how much house you can afford, get preapproved for a mortgage, find an experienced real estate agent, research neighborhoods for best fit, go house hunting, make a competitive offer within your budget, finalize your financing, and prepare for closing.

What Do I Need as a First-Time Home Buyer?

As a first-time home buyer, you need to make sure you’re debt-free and have an emergency fund of 3–6 months of living expenses. That will set you up for success as you save money for a house and become a new homeowner.

How Much Should First-Time Home Buyers Budget?

Ideally, you’ll want to save a down payment of at least 20% of the home price to avoid private mortgage insurance (PMI). PMI is a fee you pay that protects your lender (not you) if you stop making mortgage payments. First-time home buyers won’t have cash from selling a previous home to use as a down payment, so a smaller down payment like 5–10% is okay too. But then you’ll have to pay PMI. Whatever you do, never buy a house with a monthly payment that’s more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage (which has the overall lowest total cost). And stay away from expensive loans like FHA, VA and USDA.