5 Common Mortgage Mistakes to Avoid When Buying Your First Home

Avoiding Common Mortgage Mistakes

Buying your first home is sort of like hitting the road for a cross-country trip. Reaching your destination (or destinations) is exciting, but without a solid plan, it’s easy to take a wrong turn, hit unexpected detours, or run out of gas. Many first-time home buyers encounter similar pitfalls that can cost them time, money, and opportunities. But just like a well-prepared traveler, understanding the most common mortgage mistakes (and how to avoid them) will help you stay on course, find a home that’s right for you, and close with confidence. Here are some of the biggest mistakes to avoid:

 

1. Overlooking Your Budget

Setting a realistic budget is critical — but it’s not just about playing it safe. A home is a long-term investment, and it’s okay to stretch your comfort zone slightly if you have a plan to manage the expense responsibly. Here’s how to find the right balance:

Understand Affordability
Start with pre-approval to determine how much you can borrow comfortably. Work with your lender to factor in monthly payments and ongoing costs like insurance and taxes. Compare this to the likely price you will pay in rent, and the likely amount rent may increase over the years. Buying may not always be cheaper in the first year, but often by year 3-4 it is because rent goes up while mortgage payments are typically fixed.

Prepare for Leaner Months
It’s okay if your finances feel a little tight during the first year or two. Think of it as an investment in your future. The important thing is to plan for this and have options ready such as savings or the ability to work a few extra hours if needed.

Explore Creative Options
If the perfect house is just out of reach, consider renting out a room to help cover costs, working a few extra hours weekly, or finding other temporary ways to boost your income. Although money doesn’t grow on trees, it is helpful to know that over 25% of home buyers received a gift from a family member that they used towards their down payment.

What’s essential is to avoid overstretching to the point where basic necessities, like groceries or utilities, become a struggle.

 

2. Skipping Pre-Approval

Starting the process with a pre-approval sets up you for success and will likely save you time and heartbreak. As we mentioned, having a pre-approval gives you a clear price range as you begin searching for homes to protect you from falling in love with one you can’t afford.

In competitive markets, skipping pre-approval could also mean missing out entirely. If you put in an offer on a home without a pre-approval in hand, the sellers are likely to choose a different offer that they are more confident will close. Having a pre-approval, especially one from a reputable local lender, signals to sellers that you’re serious and qualified for funding of the loan.

 

3. Forgetting to Factor in Additional Costs

The price of a home is just the beginning. Many first-time home buyers fail to account for hidden expenses that can significantly impact their budget. Property taxes, for instance, vary by location and can add hundreds to your monthly costs. Homeowners insurance, often a requirement for most loans, is another recurring expense that needs to be factored in. A good lender will work with you to ensure that your pre-approval factors these items in.

Maintenance and repairs can also add up quickly — experts recommend setting aside 1-2% of your home’s value annually for upkeep (a bit less if you can do the work yourself). For example, if you purchase a $250,000 home, you might spend between $2,500 and $5,000 a year maintaining it. Accounting for these costs upfront can help you avoid financial surprises. It is important to remember though that while these changes may not be required keeping the home in good shape will also help preserve and increase its value and salability.

 

4. Focusing Solely on Interest Rates

A low interest rate is great, but it’s not the only factor to consider. Loan terms, such as the repayment period or the type of mortgage, significantly impact your monthly payment.

For instance, a 15-year mortgage may have a lower rate but higher monthly payments than a 30-year loan. Alternatively, adjustable-rate mortgages start with lower rates that may increase over time, potentially straining your budget. Working with your lender to weigh these factors can help you make sure you choose the best loan for your situation. For comparison 70%+ of buyers who use a mortgage take out a 30 year fixed rate mortgage.

 

5. Overlooking First-Time Home Buyer Programs

First-time home buyer programs can be a game-changer, designed to make homeownership more accessible and affordable. FHA Loans are a popular option with lower down payment requirements and more flexible credit standards, making them ideal for first-time buyers. USDA Rural Development (RD) Loans and VA Loans also offer zero down payment options for eligible buyers, reducing the upfront cost of purchasing a home.

While tax incentives for first-time buyers are rare, homeowners, whether first-time or not, can typically deduct mortgage interest and property taxes on their primary residence, providing ongoing savings. Taking advantage of these programs can make a huge difference, so research your options and consult with your lender to determine eligibility.

To access these benefits, research options at the state, local, and federal levels, or ask your lender for recommendations. Programs vary by location, so understanding your eligibility is key.

 

Set Yourself Up for Success in Your Home Buying Journey

Buying your first home is an exciting milestone, and avoiding these common mortgage mistakes can make the process smoother and more rewarding. With a realistic budget, thorough preparation, and the right support, you’ll be well on your way to finding a home that fits your needs and lifestyle.

When you’re ready to take the next step, our Loan Officers at Treadstone are here to help. Our team has the expertise to guide you through the process and help you secure a mortgage that works for you. Contact us today to get started!

 

FAQs

What are the most common mortgage mistakes a first-time home buyer makes?
First-time home buyers often overlook their budget, skip pre-approval, or focus solely on interest rates while neglecting the overall loan terms. They may also fail to account for extra costs like taxes, insurance, and maintenance or miss out on valuable first-time buyer programs.

How far in advance should I get pre-approved for a mortgage?
It’s best to get pre-approved at least 3-6 months before you start house hunting. This ensures you have a clear budget, can act quickly in competitive markets, and gives you time to address any issues that might affect your loan approval.

What should my budget be as a first-time home buyer?
Your budget should balance affordability with long-term investment. Ideally, choose a home where the monthly payments fit within 25-30% of your income, and consider creative solutions like renting out a room or adjusting your income to comfortably manage initial expenses.

What are extra expenses to consider when buying a home?
Beyond the purchase price, you’ll need to factor in property taxes, homeowners insurance, maintenance, and possible HOA fees. These additional costs can add hundreds, or even thousands, to your annual expenses, so planning ahead is essential.

Terms and qualifications are subject to underwriting approval and can change without notice. Not all borrowers may qualify. Credit score and down payment examples are for illustrative purposes.