First-Time Buyer Mistakes to Avoid When Shopping for a Mortgage

25 April 2025

Buying your first home is an exciting milestone, but let’s be real—it’s also a huge financial commitment. One of the biggest hurdles? Getting a mortgage. If you're not careful, a few missteps can cost you thousands of dollars or even derail your dream of homeownership altogether.

But don't worry. I've got your back! Let’s break down some of the most common first-time buyer mistakes when shopping for a mortgage and how you can avoid them.

1. Not Checking Your Credit Score Early On

Your credit score is like your financial report card. Lenders use it to determine if you’re trustworthy enough to lend money to—and at what interest rate.

Why Is This a Big Deal?

A higher credit score can land you a lower interest rate, saving you thousands over the life of your loan. But if your score isn’t up to par, you could end up with a high rate or, worse, denied for a loan entirely.

How to Avoid This Mistake

- Check your credit score at least 6-12 months before applying for a mortgage.
- If your credit score is low, take steps to improve it—pay off outstanding debts, make bill payments on time, and avoid opening new lines of credit.
- Consider using free credit monitoring tools to track your progress.

2. Skipping the Mortgage Pre-Approval Process

You might be eager to start house hunting, but jumping in without a pre-approval is like showing up to a marathon without shoes.

Why Is Pre-Approval Important?

A mortgage pre-approval tells sellers (and yourself) how much house you can actually afford. Without it, you might fall in love with a house that’s way out of your budget—only to face heartbreak when you can’t secure financing.

How to Avoid This Mistake

- Get pre-approved before you start serious home shopping.
- Make sure you’re pre-approved—not just pre-qualified. (Pre-qualification is less thorough and not as reliable.)
- Stick to looking at homes within your approved budget to avoid disappointment.

3. Not Shopping Around for the Best Mortgage Rate

Would you buy the first car you see on the lot? Probably not. The same goes for mortgages.

Why Is This a Problem?

Lenders offer different rates, fees, and terms. Choosing the first offer you get could mean spending tens of thousands more than necessary over the life of your loan.

How to Avoid This Mistake

- Compare rates from at least three different lenders—banks, credit unions, and online mortgage lenders.
- Don’t just focus on the interest rate; consider fees, loan terms, and closing costs.
- Use online mortgage comparison tools to help you find the best deal.

4. Focusing Only on the Monthly Payment

Yes, your monthly payment is important—but it’s not the only cost to consider.

What’s the Hidden Danger?

Many first-time buyers fixate on the monthly payment and forget about:
- Property taxes
- Home insurance
- HOA fees (if applicable)
- Maintenance and repairs

How to Avoid This Mistake

- Ask your lender for a complete cost breakdown before committing.
- Use a mortgage calculator that includes taxes and insurance.
- Budget for unexpected repairs—you don't want to be house poor!

5. Making a Small Down Payment Without Understanding the Consequences

Putting down 3% or 5% might sound appealing, but there’s a catch.

Why Is It Risky?

- A lower down payment means higher monthly payments.
- You may have to pay Private Mortgage Insurance (PMI), which adds to your costs.
- You could end up owing more than your home is worth if values drop (hello, underwater mortgage).

How to Avoid This Mistake

- Aim for at least a 10-20% down payment if possible.
- If you must go lower, factor in PMI costs and plan to pay it off ASAP.
- Consider down payment assistance programs if you qualify.

6. Not Understanding Loan Types

Mortgages aren’t one-size-fits-all. If you don’t know your options, you could end up with the wrong loan.

Common Loan Types to Know:

- Conventional Loans – Best for buyers with strong credit and a decent down payment.
- FHA Loans – Great for first-time buyers with lower credit scores (but require mortgage insurance).
- VA Loans – Ideal for veterans and active-duty military (no down payment required).
- USDA Loans – A solid choice for rural homebuyers (low interest rates and no down payment).

How to Avoid This Mistake

- Research different loan options.
- Talk to multiple lenders to see which loan best suits your needs.
- Ask about first-time homebuyer programs that could save you money.

7. Changing Jobs or Finances Before Closing

Lenders hate surprises. If you change jobs, make a big purchase, or open new credit lines before closing, it could jeopardize your approval.

Why Is This a Problem?

Lenders verify your finances multiple times—when you apply and right before closing. Any big changes can delay or cancel your loan.

How to Avoid This Mistake

- Keep your finances stable until you close on your home.
- Avoid opening new credit cards, financing a car, or making large purchases.
- If you must change jobs, talk to your lender first.

8. Ignoring the Fine Print

Mortgage documents are long and full of jargon, but skipping the fine print can lead to nasty surprises.

What Could Go Wrong?

- Hidden fees or penalties
- Adjustable rates that skyrocket later
- Prepayment penalties that cost you if you pay off the mortgage early

How to Avoid This Mistake

- Review your loan terms carefully.
- Ask questions about anything you don’t understand.
- Get a second opinion if something seems off.

9. Not Having a Backup Plan

Life happens. What if you lose your job, face unexpected expenses, or interest rates rise?

Why Is This a Big Deal?

Many first-time buyers overextend themselves, assuming everything will go perfectly. But a job loss or emergency can quickly turn homeownership into a nightmare.

How to Avoid This Mistake

- Have 3-6 months of expenses in savings before buying a home.
- Get a home inspection to avoid surprise repair costs.
- Choose a mortgage that allows flexibility if your financial situation changes.

Final Thoughts

Buying your first home is a huge milestone, but rushing into a mortgage without doing your homework can lead to costly mistakes. By avoiding these common pitfalls—checking your credit, shopping around, understanding loan options, and planning for the unexpected—you’ll be in a much stronger position to get the best mortgage deal possible.

Be smart, take your time, and make informed decisions. Your future self (and bank account) will thank you!