How to avoid common first home buyer mistakes

Buying your first home is terrifying and exhilarating in equal measure. You’re about to make the biggest financial decision of your life, armed with little more than internet searches, well-meaning advice from relatives, and that gnawing feeling that everyone else knows something you don’t (they don’t).  The ones who succeed avoid the landmines that blow up budgets, timelines, and sanity.

Let’s walk through the mistakes that cost first-home buyers thousands, so you can sidestep them entirely.

Mistake 1: Shopping without knowing what you can actually afford

Not having a clear budget is one of the biggest early mistakes, according to Trade Me Property. Scrolling through listings of million-dollar homes when your actual buying power sits at $650,000 is, well, slightly delusional.

You fall in love with features you can’t afford. You recalibrate your expectations upward. And when reality hits, everything in your actual price range feels like a compromise.

Get pre-approval before you start seriously house-hunting — not a vague indication, but proper pre-approval that tells you exactly how much you can borrow. Without pre-approval, you risk bidding on a property you may not be able to finance, which can lead to serious financial and legal consequences.

Factor in all costs: legal fees, building inspections, LIM report, moving expenses, insurance, and rates. Then subtract these from your borrowing capacity. What’s left is your actual house budget — now you can shop realistically.

Mistake 2: Skipping the boring bits (inspections and reports)

Although building reports can be expensive, they’re a small price to pay compared to the amount being invested and the possible cost of remedying defects in the future.

A building inspection report typically costs upwards of the mid-to-high $300 mark — potentially hundreds more for larger homes. But for something you’re borrowing half a million dollars to buy, spending $500–800 on a professional inspection isn’t excessive.

• Building inspection: A pre-purchase inspection looks for signs of problems including structural issues, water damage, rot, and maintenance concerns. Choose inspectors registered with the NZ Institute of Building Surveyors who carry professional indemnity insurance.

• LIM report (Land Information Memorandum): A LIM should reflect all council-approved features and consents for a property. If something doesn’t appear on the LIM — like a deck, garage, or extension — it can mean those works were done without council consent. Unconsented work creates serious problems: the council could require removal or alteration, insurance may not cover it, banks might refuse lending, and future buyers will balk.

Don’t rely on the vendor’s building report — you’re unlikely to have any recourse if the report misses anything because the vendor is the client. Get your own.

Mistake 3: Keeping your bank statements messy

One mistake many first-time buyers make is not keeping their bank statements clean for six months before applying for a mortgage. While banks aren’t as strict as they were during peak lending restrictions, overdraft fees, dishonoured payments, and consistent overspending still raise red flags.

Six months before you plan to buy, clean up your financial act. Pay bills on time. Avoid overdrafts. Cut unnecessary subscriptions. The bank will see everything — and sloppy money management suggests you’re a risky borrower.

Mistake 4: Falling in love before doing due diligence

Property buying isn’t a romance – it’s a transaction. Yet first-home buyers consistently make emotional decisions that override logic.

You walk into an open home, picture your furniture in the lounge, imagine Sunday morning coffee on that deck, and suddenly you’re committed to a house you haven’t properly assessed.

Buying a house is a very emotional decision, and it’s easy to get carried away — especially in an auction environment. It’s critical to approach negotiations with logic.

Visit multiple properties. Bring a friend for a second opinion. Make a checklist of deal-breakers and stick to it. Don’t let staged furniture cloud your judgment about structural issues, location compromises, or budget constraints.

Mistake 5: Auction naïvety

Auctions are designed to extract maximum price from emotionally charged buyers in competitive environments.

A winning bid at auction is an unconditional sale — you need explicit unconditional finance approval to bid at auction. This means:

• Building inspection completed before auction day.

• LIM report reviewed by your lawyer.

• Finance fully approved (not just pre-approved — actually approved for that specific property).

• Deposit available immediately (typically 10% of the purchase price).

• KiwiSaver funds cannot be used as a deposit — the money must be readily available in cash in your bank account.

Set a firm bidding limit before the auction begins and don’t exceed it. Write it down. Tell your support person. A buyer has no legal remedies if they overbid on a property and subsequently can’t afford to complete settlement.

If auctions feel too risky, focus on properties sold by negotiation or deadline sale. These options often allow for conditions such as finance and building inspections, providing more flexibility.

Mistake 6: Ignoring government support

One of the most common mistakes first-time buyers make is underestimating the support available. The KiwiSaver HomeStart Grant can provide up to $5,000 for an existing home or $10,000 for a new build.

If you’ve contributed to KiwiSaver for at least three years, you may be eligible to withdraw your savings (minus $1,000) to use toward your deposit.

Check eligibility requirements carefully — there are income caps and price caps that vary by region. But leaving free money on the table because you didn’t investigate properly is inexcusable.

Mistake 7: Choosing the wrong property type for your circumstances

Your first home doesn’t need to be your forever home. Yet buyers often stretch themselves financially trying to buy a property that ticks every box, when a strategic starter home would get them on the ladder faster.

Consider your actual needs:

• Single person or couple with no kids? A well-located apartment might beat a distant house.

• Planning to stay under five years? Factor in resale appeal, not just personal preference.

• Tight budget? Look at less fashionable suburbs with good bones rather than trendy areas with compromised properties.

House prices vary greatly by location. Smaller towns and regional centres often provide more affordable options.

Mistake 8: Neglecting the lawyer until the last minute

Getting lawyers involved before you sign is often the difference between a smooth purchase and costly stress later. They check the title for issues, ensure correct conditions are included (finance, LIM, building inspection), and protect you from disadvantageous clauses.

Don’t wait until you’ve signed a conditional agreement to find a lawyer. Line one up early — many won’t charge until you successfully buy. Establish the relationship first so you’re ready to move quickly when needed.

Mistake 9: Underestimating ongoing costs

Beyond the purchase price, you’ll need to budget for rates, insurance, maintenance, and potential body corporate fees. These ongoing costs can easily add $200–400+ per week to your housing expenses.

If your mortgage repayments already stretch your budget, you’re setting yourself up for stress. Leave buffer room for the inevitable: hot water cylinder failures, leaky taps, broken appliances, and rate increases.

Mistake 10: Trying to time the market perfectly

Recent first-home buyers are stuck with their current lenders after falling property values reduced equity significantly. Those who bought at peak prices with high loan-to-value ratios now face potential negative equity.

Does this mean you shouldn’t buy now? No. It means you should buy when your circumstances align: stable income, decent deposit, and intention to hold medium-to-long term.

Trying to pick the absolute market bottom means you’ll likely miss it entirely. If you’re buying a home to live in for 5–10+ years, short-term market fluctuations matter less than getting into the market and building equity.

The current market actually favours first-home buyers: housing affordability is at its most favourable level since pre-Covid, with first-home buyers representing around 26% of purchases.

No one teaches this stuff in school

First-home buyers make mistakes because the system is complicated, the stakes are high, and nobody teaches you this stuff in school. Real estate agents work for sellers. Banks work for themselves. You need people in your corner.

Hire a good lawyer. Get a mortgage broker. Commission proper inspections. Spend money on professional advice before you commit hundreds of thousands to a purchase.

The cost of doing it right — maybe $2,000–3,000 in professional fees — is trivial compared to the cost of getting it wrong.

Your first home will probably not be perfect. You’ll likely compromise on something: location, size, condition, or price. That’s fine. The goal isn’t perfection; it’s getting on the ladder without making catastrophically expensive mistakes.

Do your homework. Stay rational. Move decisively when the right opportunity appears. And remember: buying your first home is scary for everyone. The difference between those who succeed and those who don’t usually comes down to preparation, not luck.

Need guidance navigating your first home purchase? Call 0800 GOODWINS to connect with advisors who can help you avoid costly mistakes.