Thinking about buying your first home? Before you can unlock the door to homeownership, you have to face some important challenges along the way—from finding the perfect location to financing your purchase. Here, Bankrate discusses five common mistakes that many first-time homebuyers make and how to avoid them.


1. There’s more to the process than mortgage payments

Many first-time homebuyers decide to buy when they feel ready for a mortgage. But just because they can afford the mortgage payments, that doesn’t mean they can afford to own a home. Property insurance, taxes, homeowner’s association dues, maintenance, and higher electric and water bills are just some of the costs that first-time homebuyers tend to overlook when shopping for a place. Property taxes and insurance also have a tendency to increase every year. So, even if you can afford it now, ask yourself if you’ll be able to afford the higher costs later.


2. Looking for a home first and a loan later

Buying a property doesn’t begin with the home search. It begins with a mortgage prequalification—unless you’re lucky to have enough money to pay cash for your first house. Many first-time homebuyers can be afraid to get prequalified, fearing the lender may tell them they don’t qualify for a mortgage or they qualify for a loan smaller than expected. So, they pick a price range out of the sky and then go look for a house. That’s not how it should be done. Yes, it’s more fun to go look at houses than to sit in a lender’s office where you have to expose your financial situation, but that’s a backward approach. You get preapproved, and then you find a home. That way, you’ll make a financial decision versus an emotional decision.


3. Not getting professional help

New to the home-buying game? You’ll need a reputable real estate agent, a good loan officer or broker, and perhaps a lawyer. It’s not a good idea to venture into this process alone without professional help. Although every rule has its exception, generally, first-time homebuyers should not try to deal directly with the listing agent. If you go to a listing agent, they are only going to show you their listings. You must find a buyer’s agent to help you. If you hire an agent without a referral from friends or family, ask the agent to provide references from previous buyers. The same goes for loan officers or mortgage brokers. It’s crucial to find a professional who will give you truly independent advice, and sometimes that means hiring a lawyer.


4. Using savings on the down payment

One of the biggest mistakes first-time homebuyers make is spending all or most of their savings on the down payment and closing costs. Some people scrape all their money together to make the 20 percent down payment so they don’t have to pay for mortgage insurance, but then they are left with no savings at all. Homebuyers who put down 20 percent or more don’t have to pay for mortgage insurance when getting a conventional mortgage. That’s usually translated into substantial savings on the monthly mortgage payment. But it’s not worth the risk of living on the edge. Everyone—especially homeowners—needs to have a rainy-day fund.


5. Getting new loans before the deal is closed


You have prequalified for a loan. You found the house you wanted. The contract is signed and the closing is in 30 days. Don’t celebrate by financing another big purchase. Lenders pull credit reports before the closing to make sure the borrower’s financial situation has not changed since the loan was approved. Any new loans on your credit report can jeopardize the closing. Buyers, especially first-timers, often learn this lesson the hard way. They sign the contract, and then they want to purchase new furniture for the house or a new car.