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These are the most common slip ups made by first time homebuyers. And they could cost you big time!
1. Not saving enough money
Transitioning from being a renter to being a homeowner has incidental costs that may easily be overlooked by first timers. If you’re eyeing a listing for sale, don’t make the mistake of fixating on your mortgage costs, without considering taxes, notary fees, inspection fees, and moving costs. Read more about all the costs involved in a real estate purchase here, and then head over to our mortgage calculator to get a breakdown of all your closing costs for any given asking price.
It’s also recommended for buyers to have 2-3 months of mortgage payments in reserve, to leave themselves a cushion for unexpected turns of events.
2. Not getting pre-approved for a loan
Never start looking for a home before getting pre-approved for a loan. Your pre-approval will provide you with an exact budget, which is not not only based on your salary but also on your debt to income ratio and your credit history over the past three years. To avoid a heartache when you find out you can’t actually get the loan for your dream home, start out with a clear idea of your lending potential.
Having a pre-approval in hand will also work to your advantage in the case of a bidding war, since it shows the seller that you’re a serious buyer. If a seller has more than one offer on the table, the chances are very low that he or she would favour the offer of a non-approved candidate.
On this note, our specialized mortgage broker is currently a great offer for the holiday seasons. On 5 year fixed mortgages, you could lock in a rate of 2.59% and get $700 back on your notary fees. Apply here.
3. Getting emotionally attached
There’s no debating that buying a house is an emotional event. But considering you’re investing in what will probably be the most expensive purchase of your lifetime, you should probably treat it more as a business venture than as a drunken romance. Fixating on a small architectural detail that strings a nostalgic chord is dangerous for two reasons: firstly you risk paying much more than the home is actually worth, and which will make it harder to resell at a later date, and secondly it may demotivate you should you lose the home to someone else’s bid.
Try visiting several places that fit your criteria rather than cherry-picking based on the images, and rationalizing each option by listing their pro’s and con’s. Keep in mind that you can always renovate and add nostalgic details to the home you buy, later on. Lastly, avoid tunnel vision and take all the property features into account. Sure, you love those marble counters. But what about the neighbourhood? Have you looked at the walk score? Can you afford the condo fees?
4. Going directly to the listing agent
Working with a broker who will represent your interests is free and has huge benefits when looking for a home. The listing broker is hired by and represents the seller, not you. They won’t let you know if the building has a bed rep, or if the taxes are unreasonably high. Unless the listing broker is a personal friend or someone you can trust, always take your own representative to negotiate and spot potential issues.
Another plus point of working with your own agent is that they will provide you with a CMA (a comparative market analysis) to show you exactly how much the home is worth according to industry standards. This figure is based on various property characteristics- such as floor height, amenities, finishings, square footage, etc, as well as on recent sales prices in the building or on the same street, and how much neighbours are currently selling for. You can request a free CMA for your own home or for a home you’re considering buying here.
5. Not getting a home inspection
All homes need inspections, even ones that have been newly constructed. Skipping this step because of emotional attachment to the home is risky business. Don’t forget that discovering hidden issues is not necessarily a deal-breaker. You can ask the seller to fix them before moving in, or to lower the price accordingly.