9. Shopping before getting pre-approved for a mortgage.
Many first-time homebuyers decide theyโre ready to take the leap, and start touring open houses โjust to see whatโs out there.โ While getting a feel for the market is certainly a good idea, you risk falling in love with a home that is not in your budget. Before you start seriously shopping the market, visit your bank, mortgage broker or lender, and get a mortgage pre-approval. Youโll know the exact amount youโll qualify for, so when youโre ready to make an offer, you can do so with confidence and no โconditional of financingโ clauses.
8.ย Skipping the mortgage pre-approval altogether.
Weโre mentioning this one again, because itโs super important. Getting pre-approved not only informs you of how much you can spend on a home, but it also guarantees the current interest rate for about 90 days, giving you the freedom to shop knowing youโre safe from rate hikes in the near future. With interest rates on the rise, this step is more important than ever.
7. Making major life changes when applying for a mortgage.
Once youโve filed your application, avoid changing jobs, making big-ticket purchases on credit, or taking out new loans. These can all alter your financial picture, and can impact your ability to qualify for the mortgage or the amount you had originally anticipated. If possible, wait until after youโve crossed the โtโs and dotted the โiโs.
6. Not saving enough for a down payment.
Itโs true that the minimum requirement in Canada is five per cent, but try to put down at least 20 per cent of the purchase price. Having 20 per cent or more means you wonโt have to take out a high-ratio mortgage โ and avoid the mortgage default insurance premiums that go with it. If you are unable to save this minimum amount, this could be an indicator that youโre shopping beyond your financial capacity. Consider lowering your budget, delaying the purchase until youโve saved enough money, and consult a trusted financial advisor for advice tailored to your situation.
5. Not accounting for the โextraโ costs.
You can estimate to spend (approximately) between 1.5 to four per cent of the purchase price of the home. This includes costs such as the deposit, property insurance, title insurance, lawyer fees, home inspection fee, moving costs and more. Be sure to budget these into your purchasing plan.
4. Not seeing enough homes.
Before you settle down, make sure you sow your oats, so to speak. Since youโve never owned a home, and particularly if youโre moving from your parentsโ place, youโll want to tour lots of different home styles and neighbourhoods. Keep an open mind โ you just mist surprise yourself! When narrowing down your homeโs location, weigh factors such as proximity to work, family and friends; public transit and access to major roads and highways; and things such as shopping, services, green space, and your lifestyle. which will affect the liveability of the home, its current value, and the resale price of your home.
3. Seeing too many homes.
Donโt get us wrong โ itโs definitely a good idea to see whatโs on the market, if only for the sake of comparison. Youโll gain a better understanding of what comparable homes are valued at, their condition, and your negotiating power. This is valuable intel, whether youโre buying your first home or your tenth. But buyer beware: particularly in a hot market, sitting on the fence can mean losing the property. A trusted, experienced real estate agent can best advise you on this.
2. Not getting everything in writing.
Under the right market conditions, negotiating may be part of your purchasing plan. Any conditions of the purchase and sale must be on paper. If itโs not in the contract, it doesnโt count. Your contract is your only way of holding the buyer and seller accountable. An experienced real estate agent can help advise you, and negotiate on your behalf.
1. Biting off more than you can chew.
Youโve likely heard the term โhouse poor.โ Buying a home is a huge financial commitment, so ensure you can afford it. As a first foray into home ownership, condos are a popular choice, thanks to their lower price point, smaller footprint (read: less maintenance and lower operating costs) and their central locations. But condos are a lifestyle choice as well as a financial one. Consider your purchase from all angles.
If you are a first time home buyer and have questions, please feel free to reach out to us. We would be happy to schedule a free, no obligation consolation with one of our experienced Buyers Specialists to explain the home purchasing process and answer any questions you might have.
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