5 Mistakes to Avoid as a First Time Home Buyer

Buying a home is the single biggest Investment most people will ever make in their life.  Buying your first home can be a very exciting project. As a first-time home buyer, you need to make sure you are getting all the information you need so you can avoid costly mistakes during the home-buying process. So here are 5 mistakes to avoid as a first time home buyer so you can have a smooth transition between renting and owning a home.

1. Make sure you are financially ready

Buying a home is an expensive transaction. You need to make sure you are financially ready to Face it. There are a lot of different fees associated with the closing costs of buying a home. These are fees that you need to pay up front in order to buy the home. Although you can get a mortgage for the house, your mortgage lender will not cover the closing costs.  Closing costs include lawyer fees, inspection fees, land transfer taxes.  Closing costs in Canada can go as high as 5% of the home’ s purchase price. So make sure you know approximately how how much are closing costs would be so you can budget for it.

On top of the closing costs,  you also have to put aside some money for down payment. Ideally, you should save for a down payment as well as for the fees associated with the closing costs on a home before even thinking about purchasing one. In Canada, the minimum down payment on a house is 5% of the cost of the house. Example, if the house you are buying costs $200,000, the down payment you would have to come up with is $10,000.

So as you can see it’s important that you have some money saved up for the closing costs of the home as well as for down payment.

2. Skipping the home inspection

As I have mentioned before, your home is usually the biggest investment that you will make in your life. Remember that you will be taking out a mortgage over 25 or 30 years to pay it off. Therefore, you need to make sure that your investment is of quality before purchasing it. One of the ways of checking this is by getting an inspection done on the house before purchasing it. Inspections usually cost between $400 and $800.

It’s possible, for example, that the house has flooding issues. This is not something that you will notice as a first-time home buyer who doesn’t have any experience with inspecting a home. Don’t make the mistake of trying to save this amount of money during your home buying process as you might overlook some important repairs and end up with a nightmare on your hands.

3. Buying a house that is too big

Before even starting house hunting it’s best to figure out how much of a mortgage a lender is willing to provide. You can get a mortgage pre-approval done to figure out the amount the lender is willing to loan you to get a house. Once you have this amount, you can try to find a calculator online to see what your payments would look like based on the home purchase price. It’s possible that your lender authorizes higher amount that you can be comfortable with.

For example, if you see that your lender can provide a mortgage loan of $300,000 and using an online mortgage calculator you see that the monthly payments will not fit your budget, don’t take out the full $300,000 mortgage loan. Instead, try hunting for houses that cost about $200,000.

So just because a lender can give you a higher loan doesn’t mean you have to take out the full loan and purchase a big house. Don’t forget that there are additional monthly fees when owning a home. There are property taxes, there might be condo fees, and don’t forget about heat and water if you are not used to paying them separately when you are renting. So make sure you give yourself some wiggle room. Only you know your budget and only you can make sure you are not putting yourself in a difficult financial position.

4.  Not comparing mortgage rates

Just like you would Price shop before purchasing a new furniture or a television to get the best price, you should also shop around to find out the best rate you can get on your mortgage.

Keep in mind that mortgage loans are fairly high amounts and  a better rate can potentially save you thousands of dollars of Interest over the lifetime of your mortgage. So don’t just take one Banks word for it, take your time to shop around to get the best rate for your mortgage loan.

5. Not getting a real estate agent

I know most people are perfectly capable of finding homes online, however it would be easier on you if you can get a real estate involved in your home buying experience. Get yourself someone who can help you find the perfect home for you as well as assist in negotiating the home price.

When working with a realtor you might have access to properties before they go online or before they are available to the public. Real estate agents can really help make the process of purchasing a home less stressful so you can avoid big mistakes.

Bottom line

Buying a home is the single biggest investment you will ever make in your life. Remember that you are taking out a mortgage for 25 or 30 years down the road. So make sure you are prepared financially and that you get all the information you need to avoid big costly mistakes in the future.