Quick answer
The costliest first-time buyer mistakes are budgeting to the lender’s maximum debt-to-income ratio (50%) instead of a comfortable one (45% or less), getting a quote from only one lender when every mortgage credit check within 45 days counts as one inquiry, waiving the inspection, opening new credit before closing, and not checking the Closing Disclosure you receive 3 business days before signing. Underestimating PMI, property taxes and transfer taxes, and emptying your savings to close, round out the list.
Key facts
3business days
Appraisal copy due before closing (or promptly)
CFPB, Regulation B 1002.14 · Oct 28, 2026
The ten mistakes at a glance
| Mistake | The rule or number to know |
|---|---|
| 1. Assuming you need 20% down | Conventional from 3%, FHA from 3.5%, VA and USDA from 0% |
| 2. Ignoring what mortgage insurance costs and when it ends | PMI cancellable at 80%, automatic at 78%; FHA MIP often for the life of the loan |
| 3. Budgeting to the lender’s maximum | Freddie Mac suggests total debts under 45% of gross income |
| 4. Missing programs you qualify for | Most first-time tests look back 3 years, not a lifetime |
| 5. Emptying savings to close | CFPB: keep 3–6 months of expenses |
| 6. Getting one quote | Credit checks within 45 days count as one inquiry |
| 7. Comparing rates, not costs | One point costs 1% of the loan |
| 8. Forgetting taxes, insurance and transfer taxes | Property tax averages 0.89% of value nationally, 1.31% in Texas |
| 9. Skipping the inspection or ignoring the appraisal | You get the appraisal at least 3 business days before closing, or promptly |
| 10. New credit before closing, and an unread Closing Disclosure | Disclosure arrives 3 business days before closing |
Before you shop
1. Assuming you need 20% down
Waiting for 20% can cost years of rent. Conventional loans start at 3% down, FHA at 3.5% with a 580 or higher score, and VA and USDA at 0% for eligible buyers. The saving for a home guide shows how long each target takes.
2. Ignoring what mortgage insurance costs — and when it ends
The flip side of a small down payment is mortgage insurance. Freddie Mac puts PMI at about $30–$70 a month per $100,000 borrowed — on a $342,000 loan (5% down on a $360,000 home), roughly $103–$239 a month. On a conventional loan you can ask to cancel PMI when the balance reaches 80% of the original value, and it ends automatically at 78%. FHA’s annual premium of 0.55% lasts for the life of the loan unless you start at 90% loan-to-value or less. See PMI.
3. Budgeting to the lender’s maximum
A lender’s approval is a ceiling, not a recommendation.
The same income, three budgets
On the US median household income of $81,604/yr ($6,800 a month before tax):
| Limit | Monthly debts allowed |
|---|---|
| Fannie Mae automated approval, up to 50% of income (all debts) | $3,400 |
| Freddie Mac’s comfort guide, 45% (all debts) | $3,060 |
| Freddie Mac’s housing guide, 30% (housing only) | $2,040 |
The gap between the first and last lines — $1,360 a month — is the room an approval can give you to overspend. Debt-to-income explains how lenders count.
4. Missing programs you qualify for
Many buyers assume they don’t count as first-time because they owned a home once. Most definitions only look back 3 years. Check first-time buyer programs and your state housing finance agency before you set a budget; in Texas, for example, TDHCA assistance covers 2%–5% of the loan.
5. Emptying your savings to close
New owners face repairs, furniture and moving costs right away. The CFPB suggests an emergency cushion of usually 3–6 months of expenses. If a bigger down payment would leave you with less than 3 months of expenses in the bank, consider putting down less.
While you shop
6. Getting a quote from only one lender
Rates and fees vary between lenders for the same borrower. The CFPB says multiple mortgage credit checks within 45 days are recorded as a single inquiry, so shopping doesn’t hurt your score more than one application. Each lender must send a Loan Estimate within 3 business days of your application; ask for them on the same day so the rates are comparable.
7. Comparing rates instead of total cost
A lower rate can come with discount points, each costing 1% of the loan — $3,420 per point on a $342,000 loan. Compare the APR, the origination charges and the cash to close on each Loan Estimate, and work out how long you would need to keep the loan for the lower payment to repay the points.
8. Forgetting taxes, insurance and transfer taxes
The listing price says little about the monthly cost. Property tax averages 0.89% of value nationally but 1.31% in Texas — $267 versus $393 a month on the same $360,000 home. Get insurance quotes before you make an offer.
Transfer taxes vary even more. Texas has none, while Delaware’s state transfer tax is 2.5% of the price where a local tax also applies, typically split between buyer and seller: on the median Delaware home ($371,600) the state portion alone is $9,290, or about $4,645 for each side. The closing cost calculator shows your state.
Under contract
9. Skipping the inspection or ignoring the appraisal
The appraisal checks value for the lender; only an inspection checks condition for you. Keep an inspection contingency so you can renegotiate or walk away. Under Regulation B, the lender must give you a copy of the appraisal promptly or at least 3 business days before closing — read it, and if the value comes in below the price, use it to negotiate. More in appraisal and inspection.
10. Opening new credit — and not reading the Closing Disclosure
Then read the Closing Disclosure, which must reach you at least 3 business days before closing. Compare it with your last Loan Estimate: some fees can’t increase at all, and others can rise by no more than 10% in total. If the APR rises by more than 0.125%, the loan product changes or a prepayment penalty is added, you get a new disclosure and a new waiting period. The step-by-step guide puts each deadline in order.
Frequently asked questions
What is the biggest mistake first-time home buyers make?
Buying at the top of what a lender approves. Fannie Mae’s automated system can approve debts up to 50% of gross income, but Freddie Mac suggests keeping all debts under 45% and housing under 30%.
Does shopping for a mortgage hurt my credit score?
Not much, if you do it in a short window. The CFPB says multiple mortgage credit checks within 45 days are recorded as a single inquiry.
Should I waive the home inspection to win a bidding war?
It is risky. The appraisal protects the lender, not you, and only an inspection tells you about the roof, foundation and systems. If you must compete, consider a shorter inspection period rather than none.
Can I buy furniture or a car before closing?
Wait until after closing. New debt can raise your debt-to-income ratio or lower your score, and lenders often re-check credit just before closing.
When should I get the Closing Disclosure?
At least 3 business days before closing. Compare it line by line with your Loan Estimate and ask the lender to explain any increase.
How do I avoid paying PMI for too long?
On a conventional loan, ask your servicer to cancel PMI when your balance reaches 80% of the original value; it ends automatically at 78%. Extra principal payments get you there sooner.
Sources
- US Census Bureau, American Community Survey 2024 1-year — Median value of owner-occupied homes (2024 ACS 1-year)
- Freddie Mac My Home — Typical PMI cost, low end; Typical PMI cost, high end (Oct 28, 2026)
- US Census Bureau, American Community Survey 2024 1-year — Median household income (2024 ACS 1-year)
- Fannie Mae Selling Guide B3-6-02 — Fannie Mae maximum DTI, Desktop Underwriter loans (Apr 2, 2025)
- Freddie Mac My Home — Freddie Mac guidance: total debt payments below this share of gross income; Freddie Mac guidance: housing costs below this share of gross income (Jan 22, 2026)
- CFPB — Cost of one discount point (share of loan amount) (Oct 19, 2023)
- US Census Bureau, American Community Survey 2024 1-year — Median value of owner-occupied homes (2024 ACS 1-year)
- Delaware Division of Revenue — State real estate transfer tax (Apr 16, 2024)
- US Census Bureau, American Community Survey 2024 1-year — Effective property tax rate (median taxes ÷ median home value) (2024 ACS 1-year)
- US Census Bureau, American Community Survey 2024 1-year — Effective property tax rate (median taxes ÷ median home value) (2024 ACS 1-year)
- CFPB — CFPB: emergency cushion, low end (months of expenses); Minimum down payment on some conventional loans; Minimum FHA down payment (Oct 28, 2026)
- CFPB — Mortgage credit checks within this window count as one inquiry (Aug 28, 2026)
- CFPB — You receive the Closing Disclosure at least this many business days before closing (Oct 28, 2026)
- U.S. Department of Veterans Affairs — VA purchase loan down payment (price at or below appraised value) (Jan 7, 2026)
- CFPB — Ask your servicer to cancel PMI at this share of original value; PMI ends automatically at this share of original value (Oct 28, 2026)
- 42 U.S.C. 12704(14) — First-time homebuyer: has not owned a home in the past (HUD/HOME statute) (Oct 28, 2026)
- CFPB, Regulation B 1002.14 — Lender must give you the appraisal at least this long before closing (or promptly) (Oct 28, 2026)
- HUD Mortgagee Letter 2026-11 — FHA minimum score for maximum financing (Oct 8, 2026)
- HUD Mortgagee Letter 2023-05 — FHA annual MIP, 30-year loan, more than 95% LTV; FHA annual MIP ends after 11 years when the starting LTV is at or below (Feb 22, 2023)
- Texas Department of Housing and Community Affairs — TDHCA My First Texas Home assistance, low end (share of loan); TDHCA My First Texas Home assistance, high end (share of loan) (Program matrix Aug 17, 2026)
- CFPB — Lender must send the Loan Estimate within this many business days of your application (Oct 28, 2026)
- CFPB — Cumulative limit on increases for recording fees and lender-listed services (Sep 11, 2024)
- 12 CFR 1026.22 — APR change that triggers a new 3-business-day wait (regular loans) (Oct 28, 2026)
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.