First-Time Home-Buyer Mistakes

You’ve dreamed of buying a house, and now it’s finally time. Whether you’re imagining chasing your kiddos barefoot through the sprinkler on your own lawn or hosting holiday dinners for the first time—your future home can absolutely be a blessing. But common mistakes when buying could turn your blessing into a burden.

Here are the 12 biggest home-buying mistakes and how to avoid them.

Common First-Time Home-Buyer Mistakes

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

Should you buy a house while you’re still in debt? No. You’re not ready to buy a house until you’re completely debt-free (Baby Step 2) and have a fully funded emergency fund of 3–6 months of expenses (Baby Step 3). Debt weighs you down. And if you’re trying to buy a home while you’re forking over hundreds (or thousands) of dollars every month on debt payments, you’ll run into one of three big problems.

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Either it’ll take you forever to save a down payment, you’ll wind up taking out a bigger mortgage so you can speed up the process, or you’ll struggle to make your mortgage payments on top of your student loans, car loans and credit card bills—putting you one emergency away from missing a house payment. Heck, you may even run into all of those problems!

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 saving for retirement (Baby Step 4), saving for your kids to go to college debt-free (Baby Step 5), and traveling—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.

2. Underestimating Homeownership Costs

What are the hidden costs of owning a home? First-time home buyers might forget to factor in costs like property taxes, home insurance, HOA fees and ongoing maintenance. Plus, your utility bill will likely go up if you’re upsizing from an apartment. That’s even more reason to get out of debt before you buy.

And it’s only a matter of time before your home needs repairs. 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 when it breaks.

That’s why you need that emergency fund we mentioned earlier in addition to your down payment and closing costs. That way, you’ll be able to cover emergencies without breaking a sweat (or using a credit card).

3. Buying a House You Can’t Afford

How much house can a first-time buyer actually afford? You can afford a home if the monthly payment is within 25% of your monthly take-home pay on a 15-year fixed-rate mortgage. That limit includes principal, interest, property taxes, home 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.

For quick reference, use this table to spot the biggest financial traps first-time home buyers fall into and the Ramsey way around each one.

4. Making Too Small of a Down Payment

Is a small down payment a home-buying mistake? Yes, a small down payment leads to bigger monthly payments and more debt overall. Bad plan!

Instead, aim to 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 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, a smaller down payment—at least 5%—is okay. Just be ready to pay PMI. And stay far away from FHA and VA loans and all their fees!

5. Getting the Wrong Mortgage

What is the best type of mortgage for first-time buyers? Limit yourself to a 15-year, fixed-rate conventional loan because you’ll pay way less in interest and pay off your home way faster compared to other types of mortgages.

To put it bluntly, most types of mortgages suck. Here are some of the worst options:

• Adjustable-rate mortgages (ARMs): This type of mortgage reels you in with a low interest rate. But in most cases, your rate will increase down the road—sometimes by a lot.
• Federal Housing Administration (FHA) loans: Designed for folks who can’t make a big enough down payment for a conventional loan, these are loaded with dumb fees.
• Department of Veterans Affairs (VA) loans: Similar to FHA loans, VA loans involve a bunch of fees that people with traditional mortgages don’t have to pay.
• U.S. Department of Agriculture (USDA) loans: Moving to a rural area? Then a USDA loan may seem like a good idea. But think again—because their repayment plans often lead to borrowers going underwater on their homes.
• 30-year traditional mortgages: These offer smaller monthly payments but keep you in debt for an extra decade and a half and force you to pay tens of thousands in extra interest.

6. Skipping Mortgage Preapproval

Why should you get preapproved before house hunting? Getting preapproved—not just prequalified—for a mortgage before you start house hunting shows sellers you’re serious and speeds up the entire process. If you skip this step, a seller will likely pass over your offer for a buyer who’s already preapproved, since it tells the seller that buyer did the homework and is more likely to close without delays. 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.

Ready to get preapproved? Talk to our friends at Churchill Mortgage.

7. Shopping Without a Real Estate Agent

Should you get a real estate agent? Yes—always work with a real estate agent when you buy a home. According to Ramsey Solutions’ Real Estate Report, the majority of recent home buyers (75%) worked with an agent. And 71% of those who worked with an agent said they were extremely or very satisfied. And it’s easy to see why. Real estate agents do a lot to help you, like:

• Getting inside info on your local housing market
• Notifying you when homes you might like hit the market
• Helping you make an offer, negotiate the home price, and file paperwork

Don’t just go with the first agent you talk to, though. Try interviewing at least three agents, then pick the one you’re most comfortable with. You don’t want to put such a big transaction 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 real estate agents in your local area through our free RamseyTrusted^® program.

Once you find the right agent, know what you’re agreeing to before you sign a buyer’s agent agreement.

8. Making Emotional Decisions

How do emotions lead to home-buying mistakes? Falling in love with a home before running the numbers could cause you to overspend. Instead, stick to your budget, not your feelings.

Picture this: You go to an open house and quickly fall in love with the home. It’s got the perfect backyard for the dog, enough bedrooms for each of the kids, and those granite countertops you’ve always dreamed of.

But when you sit down to do the math, you realize it’s out of your budget. So you start to make some compromises in your head. Maybe we should increase our budget. Hey, we can’t afford this home now, but we’ll surely get raises pretty soon. It’ll be worth the extra financial stress.

Stop! A thought process like that leads to major money problems down the road.

We get it: Buying a home can be an emotional journey. But you’ve got to stick to your guns and avoid making big decisions based on those emotions. Don’t forget that facts are your friends.

9. Ignoring the Neighborhood

Why does the neighborhood matter when buying a home? The neighborhood you choose has a bigger impact on your home’s resale value than almost anything else, so don’t ignore it. You might think you’re buying your forever home, but the average homeowner only stays in their home for a little more than eight years before selling.^¹

So be sure to think about resale value when you’re house hunting. One way to do that is by paying attention to the entire neighborhood.

For example, ask what developments are planned for the area. Some, like a new school, add value to your property. Others, like a highway cutting through the neighborhood or a nearby trash dump, lower property values.

You also don’t want to buy the most expensive home in the neighborhood. Instead, choose a home that’s in the bottom price range of its neighborhood—those houses are more likely to increase in value and sell more quickly.

10. Buying a Home Without an Inspection

Why do you need a home inspection before buying? 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 its electrical, plumbing, and heating and cooling systems to help you spot potential problems, and it’s also the perfect time to make sure you’re asking the right questions when buying a house.

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.

11. Taking on Debt While Closing

Why shouldn’t you take on debt while closing on a house? Taking on new debt—like a loan for closing costs or new furniture—can blow up your mortgage approval and make homeownership a burden.

For starters, it adds an extra payment on top of your house payment. Talk about financial stress! And taking on extra debt while you’re closing changes your credit score, which sends your mortgage approval back to the drawing board and delays the closing process.

12. Not Budgeting for Closing Costs and Moving Expenses

What other costs should you budget for when buying a house? Most people know you need to save up a down payment before buying a house, but some might forget to consider closing costs and moving expenses.

According to Ramsey Solutions’ Real Estate Report 2025, the median total for closing costs on a home purchase was $7,306. These costs go toward covering third-party services like your lender, home inspector, appraiser and title company.

When it comes to moving expenses, the average cost to hire professional movers is about $1,700.^² That number can go way up for long-distance moves.

Plan for these costs, and don’t cheat by stealing from your down payment amount or emergency fund. You’ll need that money too!

Frequently Asked Questions