Given that there are so many things to accomplish, buying a home for the first time can be overwhelming, scary, stressful and exciting altogether, at the same time. A single mistake can cost you thousands of dollars! Now that’s nerve-wrecking!
Here’s a list of mistakes to avoid as a first-time home owner – and what to do instead!
10 Mistakes to Avoid as a First-Time Home Buyer
1. Looking for a home before getting pre-approved
Looking for a home before applying for a mortgage or without getting pre-approved is like shopping without knowing how much money you have in your wallet. You’re setting yourself up for a huge disappointment.
Getting pre-approved for a mortgage Simply means that you’re preparing to take the next step in the home buying process. You’ll be formally approved as long as your financial information hasn’t changed and still supports the loan that the lender had previously pre-approved you for.
With a pre-approval, you’ll be more confident that you’ll be able to afford your new home. This’ll help to ensure a smoother house-hunting process.
2. Talking to only one bank or lender
First-time home buyers are risking thousands of dollars when they talk to only one bank or lender.
When you shop around for mortgages, you’ll have a better basis for comparing rates. In doing so, you can compare terms for a home loan and other fees. Even a mere 0.01% can cost or save you thousands in the long run.
Most home buyers usually avoid this step. However, the best option is to seek help from a trusted mortgage broker. Mortgage brokers have access to many local banks and financial institutions who can offer different mortgage products based on your individual circumstances. With the help of a broker, together you can compare and decide what’s best for you.
3. Buying a house for more than you can afford
Spending more than you can afford is rarely a good idea. If you want more space or a new feature, you can always renovate. Plan with your mortgage broker so you don’t end up with high monthly payments or a first and a second mortgage.
4. Pressuring yourself or being complacent over the down payment
It’s a popular belief that you need to put 20% down as a down payment on your home. It’s recommended to put at least 20% or more down to avoid paying the mortgage loan insurance charges. You could put down as little as 5%, but a lower down payment will mean higher monthly payments.
The key is to secure a down payment that’ll make your monthly payments affordable.
5. Not maximizing first-time home buyers program
In buying a home, ignorance isn’t bliss. First-time buyers sometimes delay their home search because of their financial limitations – not knowing that there are programs you may qualify for.
There’s the First-Time Home Buyer Initiative (FTHBI), which may help to reduce your mortgage. Then there’s the RRSP Home Buyer’s Plan, that can help with your down payment. Lastly, the First-Time Home Buyers Tax Credit can help you recover some costs incurred.
6. Fixating over a house in the neighbourhood
Remember where your home is located… it’s a part of a community. So when you do finally fall in love with a home, be sure to get a feel for the neighbourhood. It’s important to take note that you can make changes to your home, but not the neighbourhood.
7. Waiting for the perfect one
Everyone has a checklist of what they want in their first home. This’ll help you refine your search. However, if you’re too stringent and wait for the perfect house that checks off every box on your checklist, you might miss out on some good opportunities.
8. Rushing the purchase
It’s understandable to become excited as you roll out your plan towards owning a house. However, you might miss out on fantastic opportunities and deals that might cost you your savings or your dream home.
Take your time to know the housing market inside and out, inspect the mortgage deals offered by different lenders and plan out how you’ll pay for your home. You need to do these things efficiently because timing is crucial. In order to run your buying journey smoothly, get help from professionals who are dedicated in making things easy and cost-efficient for you.
9. Underestimating maintenance costs for repair and renovations
TV shows and online videos make home repairs and renovation seem easy. In reality, the cost of home maintenance does break banks.
There are ways to prepare and estimate your budget for home maintenance. Some homeowners estimate 2 to 4 percent of the home value per year on maintenance. Some estimate the budget per square foot at $1 per square foot. Make sure to include this in your budget, so that it won’t be difficult for you to shell out on repair and maintenance.
10. Biggest mistake you need to avoid: Doing it alone
The biggest mistake that cuts across every item on our list is the underlying thought that “you’re alone in this journey.” Truth is, you’re not. In home buying, you’ll need the support of your partner and your family. You’ll also need to agree on the plan and act as one in making the necessary changes in your lifestyle and budget.
Aside from your family, you can also get help from professionals. Daisy Raouph is a mortgage broker and financial security advisor who’s dedicated to helping you as you buy your first home, without having to sacrifice your future financially. Start your buying journey by scheduling an appointment with Daisy today!