11 Things First-Time Buyers Always Get Wrong About Buying A House

Homeownership is a goal that many people eagerly anticipate. In a recent study by LendingTree, 94% of participants associated homeownership with their understanding of the American Dream, while 84% expressed a personal aspiration to own a home in the future. Real estate trends back up this sentiment, revealing that there were 2.1 million more owner-occupied homes in 2020 compared to the previous year—the most significant net increase since 2003-2004.

Transitioning from renting to owning a home can feel like a significant challenge. Saving for a down payment often feels overwhelming, and the multitude of small details involved in navigating the property market can make the home buying process increasingly daunting. Many first-time buyers stumble into mistakes while exploring the marketplace and managing the financial aspects of purchasing a home. While some of these mistakes may lead to minor inconveniences later on, others can have long-lasting negative impacts on financial health. Fortunately, avoiding these pitfalls is relatively easy if you know what to watch for. From the emotional journey of purchasing a home to the necessary financial calculations, here are some common mistakes that first-time buyers should be aware of as they prepare to close on their new home.

Spending more than you can afford

The first — and perhaps gravest — mistake that any new homebuyer can make is spending too much on their home. The vast majority (around 70%) of homes purchased in 2021 used mortgage funding to close the deal. While the pandemic saw a change in market behaviour, including an increase in cash purchases, mortgages remain the backbone of the homebuying experience. The result is a repayment schedule that will act roughly similar to the monthly rent payment that first-time buyers will indeed be acquainted with.

For both buyers and renters, affordability means securing a manageable monthly payment. However, homeowners face additional considerations. Right after moving in, new appliances and furniture may become a top priority and could be purchased on finance. Additionally, any repairs or issues that arise in the home are the homeowner’s responsibility, as opposed to a landlord taking care of them.

Experts recommend spending no more than 25% of your take-home pay on housing costs. Renters can adjust to changes in their financial situations by moving at the end of their lease, which may be just a few months away. In contrast, homeowners may be tied to a 25- or 30-year mortgage, making it crucial to plan your budget carefully. This planning is essential for ensuring long-term financial stability and the ability to make consistent mortgage payments.