Buying a home can be a fulfilling milestone — but it can also be pretty stressful. The home-buying process can move at lightning speed and feel very confusing, especially if you’re a first-time home buyer in a state like Pennsylvania, where home prices have exploded over the past year and competition is high.

The good news is buyers can still get their dream home if they do their research, partner up with a seasoned real estate agent, and avoid some of the most common home-buyer mistakes. Let’s look at some of the mistakes frequently made by prospective home buyers, and why you should be careful to avoid them.
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Looking at homes before you’ve even applied for a mortgage

Kicking off a home search is an exciting time, and you’re probably eager to start looking for your dream home. However, you should always get a mortgage preapproval letter before you start going to open houses.

A mortgage pre-approval shows sellers that you’re a qualified buyer and that your offer should be taken seriously. Remember, they want a fast, smooth sale as much as you do, so if you want to stand out in a crowded seller’s market, make them feel confident about you. Many sellers may not even accept offers from buyers who aren’t preapproved.

Not shopping around for the best mortgage rate

Like any big purchase, you should always comparison shop when you’re buying a home. This especially applies to your mortgage, as different lenders may offer radically different terms.

Talk to at least three lenders, and try to do it on the same day, as rates can fluctuate quickly. Read the fine print regarding fees, rates, and specific loan terms, and pay attention to intangible qualities like customer service and responsiveness, as these factors can have a huge impact on how smooth (or rocky) your financing process goes.

Not reviewing your credit report

Speaking of mortgage applications — your lender will pull your credit report when they’re deciding on whether to approve your application, and what interest rate to offer you. The information on your credit report is a huge factor in their decision — and it often contains errors.

Before you apply for a mortgage, go over your credit report yourself and make sure everything is correct. If you find a mistake, you can dispute it, and very possibly have it expunged. Small differences in your interest rate equal thousands of dollars over the life of your mortgage!

Putting every penny you have into a down payment

Saving up a down payment can be tough and takes the average home buyer a few years. So when you hit that magic number, it’s tempting to go out right away and start making offers.

But if you completely exhaust your savings on your down payment, you’ll have very little wiggle room for unexpected expenses. If you’re buying a pre-owned home, you can safely assume you’re going to have to deal with a few unforeseen expenses in your first year or two. And if you can’t afford to patch a leaky roof or get a professional to handle your termite infestation, your home will be steadily losing value while you scramble to get the money together.

Try to maintain an emergency fund separate from your down payment, so you aren’t forced to make some tough choices in your new home.

Getting tunnel vision

Everyone has a detailed list of features they want in a house, but a lot of first-time home buyers neglect to look at the bigger picture. How’s the neighborhood? What are the amenities? How far is it to your job, or things like grocery stores and schools?

You could get the perfect home of your dreams, but if the setting is wrong, you won’t be as happy as you could be. For example, if you have young children but end up living in a neighborhood of older couples, there may not be any kids for your children to be friends with. Same if you end up with a long commute, or if the schools are substandard.

On the other hand, you could buy a fixer-upper from a wholesale real estate investor, and be very happy if it’s in a great neighborhood with amenities close by and neighbors you get along with. Context matters as much as the property itself!

Making emotional decisions

In a hot market, odds are you’re going to lose a few bidding wars before you finally secure that dream home — in fact, a recent Homeadvisor survey found that nearly 80% of prospective home buyers recently got outbid on a home they wanted.

After coming out on the losing end of a few bidding wars, you might feel like you need to increase your budget, or maybe even ignore it entirely, to get a house. But don’t get desperate! Recognize that you put your budget together with care and precision and buying a house you can’t really afford can be a huge source of stress and regret. Keep a cool head, don’t get drawn into emotional bidding, and trust that you’ll get those house keys eventually.

Missing out on a home buyer’s rebate

Many first-time home buyers — and plenty of experienced ones, too — don’t know that they could get back up to 1% of their home’s purchase price as a home buyer’s rebate. This rebate comes out of the buyer’s agent’s commission, so you should negotiate with your agent well before closing. In a competitive seller’s market where homes are flying off the market almost as soon as they’re listed, many agents will be glad to hand over a rebate, since they can easily make that money up in volume.

One potential snag: Home buyer rebates are prohibited in some states. (Alaska, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, Oregon, and Tennessee fully prohibit rebates, while a ninth state, Iowa, only allows them under certain circumstances.)

Underestimating the ongoing costs of owning a home

A lot of first-time home buyers think that the down payment, closing costs, and monthly mortgage payment is the extent of their financial obligations. But owning a home isn’t cheap — a recent study from Clever Real Estate found that the average homeowner spends $15,000 a year on their home on top of their mortgage payments.

Where is this money going? Property taxes are a big expense — even if you take advantage of all the usual homeowner deductions. And then you have utilities, homeowners insurance, regular maintenance, and emergency repairs — like a boiler that goes out in December, or a roof that suddenly springs a leak.

The good news? You should be able to get a general idea of how much some of these costs will run you before finalizing the purchase. You can ask the seller for the previous 12 months of utility bills, and estimates for expenses like property taxes, homeowners association fees, and insurance rates aren’t hard to find.

Article last modified on May 9, 2022. Published by Debt.com, LLC