1.     Shopping for a Home Before Getting Pre-Approved

Unless you are one of the fortunate few who can pay cash for a new home, getting pre-approved should be one of your first steps in the home-buying process.

One of the most common mistakes I see first-time homebuyers make is starting their home search before knowing whether they can qualify for financing. It can be exciting to start looking at homes but falling in love with a property before understanding your budget and whether you qualify can lead to disappointment—and potentially wasted time for you and all parties involved.

Getting pre-approved upfront gives you a much clearer picture of your purchasing power. It allows you to understand how much you may qualify to borrow, which loan programs you may be eligible for, what your estimated monthly payment could look like, and what interest rates and down-payment options may be available to you.

2. Focusing Only on the Interest Rate

After 21 years in the mortgage business, I have found that one of the most common mistakes borrowers make is focusing almost exclusively on the interest rate while overlooking the bigger financial picture.

A lower interest rate does not always mean you're getting the best mortgage or the best overall financing for your situation. There are many other factors that should be considered, including closing costs, loan terms, points, monthly payment, loan program, assets and how long you plan to keep the mortgage.

I remember a mentor of mine telling me early in my career, “Originating a mortgage loan is like a thumbprint—it’s different for everyone.” That statement has stayed with me throughout my career because it is so true. No two borrowers have the same financial situation, goals, credit profile, income, assets, or long-term plans.

3. Using Every Dollar of Savings for the Down Payment

One of the biggest mistakes I have seen many borrowers make is putting every available dollar of savings toward the down payment and leaving themselves with little or no cash reserves after closing.

Buying a home involves much more than the down payment. Buyers also need to account for closing costs, moving expenses, furniture, appliances, and the possibility of unexpected repairs or maintenance shortly after moving in. Even a home that appears to be in great condition can come with expenses that weren't anticipated.

For that reason, it can sometimes make more financial sense to put less money down and keep a healthy emergency fund. Having cash available after closing provides a financial cushion and can prevent homeowners from relying on credit cards or high-interest loans when an unexpected expense comes up.

4. Taking on New Debt Before Closing

This is a big one! One of the most important things I tell borrowers is to avoid taking on new debt between the time they apply for a mortgage and the day they officially close on their home.

It can be tempting to start preparing for the new house by financing a car, opening a new credit card, purchasing furniture, or making other large purchases. However, these financial changes can create potential problems.

When a borrower applies for new credit during the mortgage process, the lender will get notified of the new account through credit monitoring. The lender will then be required to document the new liability and count it into the borrower’s debt-to-income ratio (DTI). Which could jeopardize loan approval for some. Just wait on that purchase, it’s not worth it.

5. Buying More Home Than You Can Comfortably Afford

One of the biggest mistakes many home buyers make is assuming that the maximum amount a lender approves is the amount they should spend on a home.

Just because you qualify for a particular loan amount doesn't necessarily mean that you should shop at the very top of that price range. A mortgage qualification is based on specific financial criteria and guidelines, but it doesn't account for every expense that comes with everyday life.

When lenders calculate a borrower's debt-to-income ratio (DTI), there are many expenses that typically aren't included in that calculation. Things like groceries, gas, vacations, entertainment, childcare, diapers, medical expenses, car repairs, subscriptions, and other everyday spending can have a significant impact on a household's monthly cash flow—even though they may not be considered when determining mortgage qualification.