Introduction

Buying your first home should be one of life's most exciting milestones, not a financial nightmare. Yet every week, we see well-meaning first-home buyers make preventable mistakes that cost them thousands of dollars, months of delays, or worse -- their dream home slipping away to another buyer.

With the median first-home buyer paying around $700,000 in 2025, even small mistakes can have massive financial consequences. The good news? These mistakes are entirely avoidable when you know what to watch out for.

After helping hundreds of Kiwis navigate their first home purchase, here are the five most costly mistakes we see -- and exactly how to avoid them.

Mistake #1: House-Hunting Before Getting Pre-Approval

The Problem:

You fall in love with a $750,000 home, make an offer, then discover the bank will only lend you $650,000. Heartbreak and wasted time follow.

Why this happens:

The excitement of house-hunting is intoxicating. You see beautiful homes online, attend open homes, and start imagining your life there. But without pre-approval, you're shopping blind.

The real cost:

Beyond emotional disappointment, you might:

• Waste weeks or months looking at unaffordable properties
• Miss out on homes within your actual budget while chasing unrealistic ones
• Rush into poor financial decisions when you finally find something affordable

How to avoid it:

Get pre-approval before you start seriously house-hunting. A good mortgage adviser can usually get you pre-approved within 2-3 days, giving you:

• A clear budget to work within
• Confidence when making offers
• Faster settlement processes
• Negotiating power (sellers prefer pre-approved buyers!)

Mistake #2: Dramatically Underestimating the Extra Costs

The Problem:

You budget for a 10% deposit but forget that buying a home involves many other significant costs that can add up to $15,000-25,000 or more.

The Hidden Costs Include:

• Legal fees: $1,500-3,000
• Building inspection: $600-1,200
• LIM report: $300-500
• Valuation: $800-1,200 (if required by lender)
• Insurance: $1,500-3,000+ annually
• Moving costs: $1,000-3,000
• Immediate home improvements: $2,000-10,000+
• First Home Loan insurance premium: Now 1.2% of loan value for new applications after July 1, 2025

Real example: On a $700,000 home with a 10% deposit ($70,000), you might need an additional $20,000 in cash for settlement costs and immediate needs. Many first-time buyers only budget for the deposit and find themselves scrambling for extra funds.

How to avoid it:

• Budget an extra 3-5% of the purchase price for all costs beyond your deposit
• Get detailed quotes from lawyers and inspectors early
• Speak to an adviser and select the most suitable insurance before you need it
• Keep a buffer fund for unexpected costs that always seem to arise

Mistake #3: Talking to Only One Bank (Or Going Direct to Banks)

The problem:

Each lender has different policies, rates, and appetite for first-home buyers. By only approaching one bank, you might get declined when another lender would happily approve you, or accept higher rates when better options exist.

Why this matters more for first-home buyers:

Banks assess first-home buyers differently. Some are more conservative, others more flexible with:

• Income requirements
• Deposit sources (especially KiwiSaver)
• Employment history
• Existing debts

Real-life impact:

• Interest rates: Even 0.1% difference costs $700 annually on a $700,000 loan
• Approval likelihood: One bank might decline you while another approves the same application
• Loan features: Some offer better offset accounts, redraw facilities, or lower fees

How to get it right and find the best lender and product:

Use a mortgage adviser who will:

• Compare all lenders simultaneously
• Know which banks prefer first-home buyers
• Present your application in the best light to each lender
• Negotiate better rates and/or terms than you could get directly
• Save you hours of paperwork and phone calls

The cost of working with an adviser? In almost all cases mortgage advisers are paid by the bank, not you, so using one costs nothing but can save thousands!
(Mortgage advisers may charge fees in specific situations, such as when lenders don't pay commission (typically the non-bank lenders), or when you repay your mortgage early (within 2.5 years (causing a commission clawback for the adviser), or if you switch lenders before the clawback period ends.

Mistake #4: Leaving Insurance Until the Last Minute

The problem:

Your lender requires home and possibly life insurance before settlement, but you wait until the last week to organise it. Suddenly, insurance becomes a bottleneck that could delay or derail your purchase.

What lenders typically require:

• Home insurance: Must be in place before settlement, covering at least the loan amount
• Life insurance: Often required to protect the loan if something happens to you
• Income protection: Sometimes required, especially for self-employed buyers

Why this creates problems:

• Insurance applications can take 1-2 weeks to process
• You might have health issues that complicate life insurance
• You need time to compare policies and get the best deal
• Last-minute applications often result in poor coverage choices

How to avoid it:

• Start insurance conversations as soon as your offer is accepted
• Get quotes from multiple insurers while you're waiting for other processes
• Be honest about your health -- trying to hide issues can void policies later
• Consider using an insurance adviser to find the best deals

Mistake #5: Trying to "DIY" the Entire Process

The problem:

You think you can handle everything yourself to save money, but the home-buying process involves complex legal, financial, and negotiation elements where mistakes can cost far more than professional help.

What "DIY" first-home buyers often get wrong:

• Sale & Purchase Agreement terms: Missing important conditions or deadlines
• Building inspection interpretation: Not understanding what issues are serious
• Settlement coordination: Poor timing between different parties
• Mortgage structuring: Missing opportunities for better loan features
• Legal compliance: Overlooking important disclosure requirements

The False Economy:

While professionals do cost money, mistakes cost more:

• A good lawyer prevents costly legal issues: $2,500 fee vs. potential $50,000+ problems
• A mortgage adviser optimizes your loan: $0 cost to you vs. thousands in higher rates
• A buyer's agent negotiates better prices so their fee often pays for itself in savings

When DIY makes sense vs. when it doesn't:

• DIY-friendly: Initial research, comparing properties online, attending open homes
• Professional help essential: Legal contracts, lender selection, mortgage applications, complex negotiations, insurance advice

How to get the best of both worlds:

• Do your own research and initial legwork
• Engage professionals for specialized tasks (especially legal, lending, and insuring)
• Stay involved in the process but lean on expertise for critical decisions
• Ask questions and learn from your advisers

The Hidden Cost of These Mistakes

These mistakes don't just cost money -- they derail dreams and create lasting financial damage.

Real-life financial impact (examples):

• Going to the wrong lender or the wrong loan structure or term: Could cost you an extra 0.5-1% in interest rates = $3,500-7,000 annually on a $700,000 loan
• Missing settlement deadlines due to poor planning: Penalty clauses can cost $100-500 per day, plus potential loss of deposit
• Inadequate budgeting: Running short at settlement might force expensive emergency borrowing at 15-20% interest rates
• No building inspection: Major structural issues discovered after purchase can cost $20,000-100,000+ to fix
• Poor insurance choices: Inadequate coverage could leave you with six-figure bills after a disaster; premium may be too high; terms not the most favourable for your situation.

The Stress Factor:

We've seen buyers lose their dream home just days before settlement because they couldn't secure last-minute financing, watched families scramble to borrow money from relatives when unexpected costs arose, and helped people who discovered major property defects that could have been caught with proper inspections.

Opportunity Cost:

While you're fixing these mistakes, other buyers with proper preparation are securing the best properties. In a competitive market, being unprepared doesn't just cost money -- it costs you choice.

Your First Home Success Strategy

The most successful first-home buyers we work with follow a simple pattern:

1. Get pre-approved first -- know your true buying power
2. Budget comprehensively -- include all costs, not just the deposit
3. Use professional help strategically -- mortgage adviser, lawyer, insurance adviser
4. Start processes early -- insurance, building inspections, legal reviews
5. Stay flexible but decisive -- be prepared to move quickly when you find the right home

Take Action: Avoid These Mistakes From Day One

Buying your first home doesn't have to be overwhelming or financially dangerous. With the right preparation and professional guidance, you can navigate the process confidently and avoid these costly pitfalls entirely.

The key is starting with expert advice rather than trying to figure it out as you go. Every day you delay could mean higher interest rates, rising property prices, or missing out on your ideal home.

Ready to buy your first home the right way? Our experienced team has guided hundreds of first-home buyers through this exact process. We'll help you get pre-approved, budget accurately, and coordinate all the moving parts so you can focus on finding your perfect home.

Don't let avoidable mistakes cost you thousands or derail your home-buying dreams.