Most of the time, the largest expense (other than a wife) that someone makes is in the purchase of a home. It's a massive cost, both for the downpayment which often ranges from 10 to 20%, as well as the monthly installments which can now stretch to over 40 years (meaning that it could very possibly be a debt that passes on to your next generation).
The three most common mistakes, in my opinion, are as follows.
Firstly, many people get really caught up in the emotion of owning a home and rush into it. They had previously been staying with parents and then a rented room during college and early working days. Finally, they want to own their own place, design it the way they want, and feel that sense of ownership...especially if they are a young couple purchasing their home to settle together. At the same time, the older folks are telling them that rent money burns while you are investing into equity when you are paying the mortgage.
However, in many situations, it's actually better to rent. It's cheaper, less troublesome, has no hidden costs and allows for quicker changes when you need to move to a different location. There are certain housing areas which are very cheap to rent but very expensive to purchase and if it fits your circumstance to stay there (eg distance to workplace, public transport accessibility, ailing parent needing standby support regularly), then rent. As a general guideline, if it is more than 30% cheaper to rent in a place than the costs of home-ownership that it makes all the sense to live in, then that should be your decision.
Secondly, some people may not rush in but still let their emotions carry them to purchase a home that is more expensive than they can afford comfortably. In general, a good rule of thumb is to not purchase a home worth over 2.5 times of your annual income, or take on a mortgage which has installments over 30% of your monthly income.
Of course if you're a couple buying a home together, the amount you can spend on it grows according to the combined income. At the same time, it is important that you shop around for the best home loans available from banks and even insurance agencies. It's highly competitive and many banks will be willing to give a better package after negotiation. Finally, I don't recommend to get a loan above 30 years in tenure...the thought of passing on any debt to my children appalls me.
Thirdly, I've met quite a few people who did not take into account the extra costs required to put the purchase into place such as the lawyer fees, valuation expenses, stamp duties, and administrative charges. They usually consider the downpayment and the actual loan but fail to notice that the extra fees can be quite significant as well.
At the same time, the basic furnishing and renovations sometimes needed in a new home can actually push up the expenditure quite painfully. Suddenly, on top of the expected outlay, these people have to find other funds and oftentimes use their credit card, only to get themselves in trouble in an entirely different sort of debt.
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