Top First Time Home Buyer Pitfalls to Avoid

When buying a home as a first time homebuyer, the process can feel overwhelming with lists to make, documents to gather, and details to remember. There are also some pitfalls that you should avoid when buying that first home. Our Georgia mortgage lender team has gathered a list of the top mistakes that new homebuyers tend to make and how to avoid them.

Pitfall 1: Not Being Prepared

Being prepared to buy a home and go through the mortgage process is an important step that a lot of first-time homebuyers seem to miss. When you go through the mortgage application process, a lot of paperwork is required. Your credit history and credit score are pulled up, your debt-to-income ratio is analyzed, and financial details are delved into in order for lenders to determine how much of a credit risk you may be. Not being prepared could ultimately end up in you not getting the home you wanted.

What you should do is take the time to gather your documentation and go over your credit report so that things run more smoothly. Several months ahead of time, you should go over your credit report looking for any errors that may be bringing your score down. Look at weak areas that need to be fixed, like having too much debt. Paying down high-interest debts can go a long way in upping your credit score.

When it comes time to make your loan application, you'll need to have documents that proof of your identity, employment, income, and statements for bank accounts. Lenders usually look at 3 months worth of these, so making sure you have everything together and ready to hand in if you want to make the process run more smoothly.

Pitfall2: Not Reviewing Their Budget

This goes hand in hand with getting your documents and credit history in order. We've seen many first-time homebuyers who haven't even taken a look at their monthly budget and end up spending more funds than they can realistically afford. Knowing what your budget is will help you find a home you can afford, as well as save you time because you won't be looking at homes that are out of your budget range. The last thing you want to do is be “house poor”, or not being able to cover the basic home costs of a new home because all of your funds are tied up in your mortgage.

When shopping for a home, you need to be flexible, as well as prioritizing your home needs over your home wants. Also, don't limit your choices by only looking at homes in one area. The key to sticking with a budget is to not spend over 28% of your wages on your monthly repayments. You can access a number of tools online that will help you figure out what your budget is.

Pitfall 3: Knowing the Difference Between Pre-approval and Pre-qualification

We often see these two terms used interchangeably, but they are quite different when it comes to making a successful bid on a home. We also see many first-time homebuyers forego getting a pre-qualification or pre-approval.

Both are an estimation of how much a lender is willing to approve you for. A pre-qualification is a more basic look over your finances to give you an estimated guess on how much you could get for a mortgage. It doesn't go into the deeper details of your finances though and can change drastically once you start going through the actual mortgage process. With a pre-approval, your financial details are evaluated by an underwriter, and you are given what is known as a conditional mortgage loan. With this comes a document that details the amount you have been approved for, as well the interest rate you are being offered. A pre-approval also gives you an advantage when it comes to making a bid on a home. It tells a seller that there is less of a chance that a sale will fall through, and that the mortgage process will go a bit quicker. 

Pitfall 4: Foregoing the Home Inspection

Another mistake that first-time homebuyers tend to make is forgoing having a home inspection. While this may cut down on your expenses, it could end up costing you much more in the end. You can view a property that looks good to you, only to later discover there were issues with the foundation or plumbing. Having a proper home inspection ensures that you won't have these unwanted surprises because the inspectors know what to look for. It also gives you more negotiation leverage, meaning you can ask the owner to either sort out the issues or lower the asking price.

Pitfall 5: Not Putting Funds Aside for Additional Costs 

Budgeting for a mortgage is more than just putting aside money for a downpayment. You have a number of other costs involved, such as your closing costs, which can include attorney, title, and insurance fees. Closing costs tend to be around 3% to 5% of the home's purchase price.

You also need to factor in how much it will be to run a home after you have purchased it. It's more than just your monthly repayments to consider. You'll need to consider utility bills, regular maintenance, property taxes, and homeowners insurance to name a few. It's important to have those extra funds put aside specifically for these things so you don't end up with a home that you can't afford to run.

Buying your first home should be a happy occasion and being prepared is a big art of lessening the stress. If you would like to know more about what to expect when buying a home, you can give our

Georgia mortgage lender team a call today!