To continue enjoying all the features of Navy Federal Online, please use a compatible browser. You can confirm your browser capability here.

Bottom Line Up Front

  • Budgeting is an important part of homebuying: both before closing and after purchase.
  • Taking the time to shop around for lenders and inspectors can save you big bucks.
  • Be mindful of your credit when applying for a mortgage. Be consistent until you close!

Time to Read

5 minutes

August 3, 2022

Buying your first home can be thrilling, but don’t let that excitement derail your finances. Learn from the mistakes of other first-time homebuyers before signing a home purchase agreement. Avoid these common mistakes and learn what you can do instead to keep the home-buying process (and your finances) safely on track.

Mistake #1: Buying When You Should Be Renting

The decision to buy a home is a big one—make sure it’s the right one for you. There are 2 principal times when renting may be better than buying. One is if you think you’ll move again soon (within a year or 2). The other is if home prices in your area have skyrocketed in comparison with property rental rates. We recommend using our buying vs. renting calculator to figure out which option makes more sense for you from a financial standpoint.

Mistake #2: Not Getting Preapproval

Before you start shopping around for a home, get preapproval from a lender. Preapproval simply means that a lender is willing to underwrite a mortgage loan up to a certain amount if and when you engage a seller. Not only does it set the budget for what you can afford, it also speeds up the financing process when you get an accepted offer. Failing to get preapproved could leave you at a disadvantage if there are multiple bidders on a property.

Mistake #3: Not Budgeting for a Home Purchase

Too many new homebuyers don’t realize that the budget for buying a home goes beyond the agreed-upon purchase price. You’ll also need to prepare for transactional costs at the point of sale. Typically, homebuyers pay approximately 3% to 6% of the purchase price of their home in closing costs. On a $300,000 home purchase, that could add $9,000 to $18,000 to final costs. Beyond generic budgeting, work with your mortgage lender to identify these costs ahead of time and budget them in accordingly:

  • Appraisal fee, averaging $300 to $500.
  • Taxes, calculated based on the home’s value.
  • Homeowners insurance, based on the home’s value and insurer.
  • Attorney fees, which are variable if required.
  • Processing fees, which vary based on the lender.
  • Other costs, such as survey fees, title insurance and recording charges.

Mistake #4: Forgetting About Added Costs

Alongside closing costs and transaction fees, first-time homeowners also need to get familiar with what, exactly, constitutes a monthly mortgage payment. Your payment toward principal is only part of your monthly mortgage payment. When buying a home, remember the acronym “PITI,” which stands for the 4 typical parts of a monthly mortgage payment: principal, interest, taxes and insurance. Don’t forget about homeowners association (HOA) dues, if applicable. Beyond knowing the sum total of what you’ll owe each month, understand the breakdown of what you’re paying for.

Mistake #5: Not Shopping for Financing

Not every lender offers the same rates and terms on their mortgage loans. In fact, a few fractions of a percent can make a big difference in how much you pay in interest throughout the life of your loan. Before you choose a lender, shop around and get several quotes to see how much variation there is. For 14 to 45 days, depending on what type of credit score a lender uses, you can shop for financing options. Stick to the safe side and make your search shorter, ideally up to 14 days. Shopping around could save you money both up front and long term.

Mistake #6: Skipping the Home Inspection

For a few hundred dollars, a professional home inspection is a relatively cheap way to ensure your major purchase is soundly built and up to date. While your real estate agent might suggest a home inspector they trust, do some research on your own or get a recommendation and hire an inspector yourself. Choose a reputable inspector with a track record of being thorough. Remember that paying a premium on your home inspection could save you big bucks, as opposed to the cost to fix unforeseen problems a lesser home inspector might miss.

Mistake #7: Immediately Adding New Furnishings

Don’t feel like you have to outfit every room in your new home with new stuff. Add new furnishings gradually, as your budget can afford. That way you’ll have a better sense of your new home’s style, too. Trying to furnish on Day 1 could mean stretching your finances thin, leaving you without the cash to make basic repairs and improvements. Trying to finance furniture can also put a dent in your credit if you open up a new credit card right after taking out a mortgage loan.

Mistake #8: Applying for Credit Before the Sale Is Final

Speaking of opening new credit cards—don’t! At least not until after your home sale is officially final. Until you sign the closing paperwork and receive the keys, the sale is still pending. Adding new credit inquiries or changing your credit profile could cancel the agreement between you and your lender. From the time you seek preapproval to the final closing paperwork, don’t open any new accounts or apply for any new lines of credit.

Avoid These Pitfalls by Working With a Lender You Trust

Buying a home is an unfamiliar and complex process for first-time homebuyers. At Navy Federal Credit Union, we know the rewards (and challenges) of buying a first home. We’re here to support you in your home-buying journey, every step of the way, to help you avoid pitfalls like these on the path to homeownership.

Next Steps Next Steps

  1. Request a free copy of your credit report at Take time to clean up your report by paying down debt and addressing errors. Do this before you seek preapproval.
  2. Get a mortgage preapproval from Navy Federal. This will help you establish your budget and put you on track to getting financing after you get an accepted offer on the home of your dreams.
  3. Create a budget for before, during and after the home-buying process. Before, budget for the cost of a down payment. During, accommodate closing costs and fees. After, budget for your monthly mortgage payment and ongoing fees.


This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.