Buying a house is always a stressful process. But for first-time homebuyers, the stress and anxiety can be tenfold. There's a lot you need to do, and so much you need to know, it can feel more than overwhelming at times.
We don't want to scare you away from buying a house for the first time. In fact, we want to do the opposite: empower you to understand the process and learn about the most common mistakes first-time homebuyers make.
If you're aware of these five mistakes most first-time homebuyers make, and how to avoid them, you can save a lot of stress and time.
6 Common First-Time Home Buyer Mistakes
- Not Getting Pre-Approved for a Loan
The maximum purchase price you can afford
Your estimated monthly payment is based on real market conditions (not what some online search tool is telling you it will cost)
An official pre-approval letter, which you'll use to show sellers you're qualified to make an offer on their home
- Not Understanding Your Down Payment Options (and thinking you need 20% down!)
It's a common misconception that you have to put 20% down on a home. This is NOT true!
The only thing to note about your down payment is that if you put less than 20% down, you will be required to pay for Private Mortgage Insurance (PMI). This is a monthly cost that's typically 0.5-1% of your total loan amount.
That said, the larger the down payment you make, the lower your monthly mortgage price will be. It can take a few years to save up a larger down payment, however, it could be worth it.
How to avoid this mistake: Talk to your lender about down payment options. By getting a pre-approval, you'll know the type of loan you qualify for and how much you need to put down on a house.
So, how much do you have to put down? This mainly depends on the type of loan you're applying for:
VA loan: 0% down. VA loans, which are for current military members and veterans, typically don't require any money down.
Conventional loan: as little as 3% down. Conventional loans aren't backed by the government, but usually only require 3% down.
FHA loan: as little as 3.5% down. FHA loan down payment requirements are based on your credit score. The higher your credit score, the less you have to put down. For example, if your credit score is over 580, you'll only have to put 3.5% down. However, if your score is lower than that, you could be required to put 10% down.
Jumbo loan: as little as 10%. If you're purchasing a house that has a bigger purchase price than what a conventional loan allows (which is usually around $650,000), you'll need to take out a jumbo loan. These typically require 10-20% down.
Each type of loan comes with its own stipulations of purchase prices, debt-to-income ratios of the borrower, and the type of home you can buy. Your lender will discuss all of these details with you, and let you know the bare minimum you'll have to put down.
First-Time Home Buyer Down Payment Assistance Programs
To incentivize first-time homebuyers, there are many local and government programs that provide down payment assistance.
This is usually in the form of a grant or zero-interest loan that can be used to pay for a down payment. The assistance program you qualify for depends on your income, credit score, age, and the type of home you're looking to buy.
Visit DownPayment Resource to browse assistance programs!
- Draining Your Entire Savings
- Being Reckless With Your Credit
Opening new credit cards
Taking out a new loan (such as a car loan)
Closing credit cards
Making a large purchase on a credit card
Forgetting to pay one of your credit cards
- Buying More House Than You Can Afford
The market is crazy right now, and it's easy to get swept up in the emotions of buying a house now rather than waiting a year or two.
Many first-time homebuyers can get too attached to houses they're looking at. They might absolutely love a house so much that they're willing to go over their initial budget, especially in a seller's market. However, it's important to strictly stick to your initial budget.
How to avoid this mistake: Don't go over your initial budget, and don't let emotions cloud your judgment.
It's important to note that a lot of lenders will qualify you for a higher purchase price than you might feel comfortable with. This does NOT mean you should spend that much on a house. Make sure that whatever purchase price you're looking at still leaves some room in your budget.
- Forgetting About the Hidden Costs of Home Ownership
The costs of owning a home are a lot more than your monthly mortgage payment. This is commonly overlooked by first-time homebuyers.
It might seem appealing when you're looking at online mortgage calculators and notice that a mortgage payment is much less than your rent. Why not buy, right?! Well, there are quite a few other monthly costs to consider.
How to avoid this mistake: Make sure you fully understand all of your monthly costs.
Monthly costs when you're a homeowner include:
Property taxes. New Jersey homeowners pay the highest property taxes out of any other state in the entire country, according to SmartAsset. The average tax rate is about 2.4% of the home's purchase price. On a $250,000 home, that's around $6,000 per year in property taxes, or about $500 per month.
Private mortgage insurance. This only applies if you put less than 20% down. However, it's typically 0.5-1% of a home's purchase price. On a $250,000 home, that's $100-$200 per month.
Homeowner's insurance. This is the typical insurance required for any homeowner to have. Costs can vary, especially depending on where you live and the insurance provider you choose, but it's best to budget a least a few hundred per month for this.
Utility bills. Compared to a small apartment, utility bills in a home can cost a lot more. You can have your realtor request utility bills from the seller's agent to give you a better idea of what this might cost.
Your real estate agent can provide current data on property taxes, estimated insurance, and even recent utility bills.
You shouldn't even start looking at homes until you've gotten pre-approved for a mortgage.
A mortgage pre-approval is the first step to buying a home.
When you go through the pre-approval process, you'll receive an official pre-approval letter that states how much you're qualified for, what your interest rate will be, and your estimated monthly payments. This letter shows you're qualified for whatever houses you're going to look at (as long as they're in your quoted budget) and lets you know exactly how much house you can afford.
It provides you with vital information, including:
How to avoid this mistake: Reach out to various lenders. You can research lenders on your own or ask your realtor for recommendations. Shop around, getting a few different quotes from lenders — some might have better interest rates than others, so it's important to get more than one pre-approval.
The pre-approval process is pretty in-depth. You'll need to submit bank statements, pay stubs, and allow them to pull your credit report. However, this is an absolute must-have before you start shopping for a home, especially in a competitive market.

This is one of the most common first-time homebuyer mistakes.
Let's say you've taken all of the steps mentioned above and you know the house you're going to buy requires $30,000 for a down payment and closing costs.
However, you only have $30,000 in your savings, so this would drain every dollar you have. Should you still go for that house? Probably not — at least, not yet.
How to avoid this mistake: Make sure you have enough to cover your down payment and closing costs without draining your entire savings account. It's best to still have three to six months of living expenses left in your savings account.
It's recommended to make sure you'll still have an emergency fund even after you pay your down payment and closing costs. Unless you're buying a brand new house, it's normal to have to pay for some repairs, furniture, or any other unexpected costs that might arise with homeownership.
Many first-time homebuyers don't realize how important their current credit score is. When you go through the pre-approval process, the amount you qualify is based on the status of your current financial information.
If you do things that will affect your credit score such as opening a new credit card, racking up the bill on one, or closing an old account, it could affect what you qualify for.
How to avoid this mistake: Once you've gotten your pre-approval letter and start looking at houses, it's important to not make any drastic changes to your credit score. Trust us, you don't want to have to learn this lesson the hard way!
You should avoid the following while shopping for a house:
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Buying Your First House in Central New Jersey?
If you're buying your first (or third!) hour in Central New Jersey, our expert real estate agents can guide you through the entire process. Buying a house with us means we will answer all of your questions, explain all of the pros and cons, and provide all the resources you could possibly need.
Contact us today to start your home buying process!