10. Not working with an experienced agent.
The purchasing process can be confusing, especially if you’ve never bought a home before. An experienced real estate agent will be able to guide you through the process from start to finish, including advising you on neighbourhoods and properties, making an offer, negotiating a deal, paperwork and closing. Tap into your agent’s expertise – after all, this is what they do best. A good agent will also be able to help you avoid the following nine home buying mistakes.
9. Shopping before getting pre-approved for a mortgage.
Many first-time homebuyers decide they’re ready to take the leap, and start touring open houses “just to see what’s out there.” 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. You’ll know the exact amount you’ll qualify for, so when you’re ready to make an offer, you can do so with confidence and no “conditional of financing” clauses.
8. Skipping the mortgage pre-approval altogether.
We’re mentioning this one again, because it’s 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 up to 120 days, giving you the freedom to shop knowing you’re 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 you’ve 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 you’ve crossed the ‘t’s and dotted the ‘i’s.
6. Not saving enough for a down payment.
It’s 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 won’t have to take out a high-ratio mortgage, and you’ll avoid the mortgage default insurance premiums that go with it. If you are unable to save this amount, it could be an indicator that you’re shopping beyond your financial capacity. Consider lowering your budget, expanding your search area, or delaying the purchase until you’ve saved enough money. It’s a good idea to consult a trusted financial advisor for advice specific to your situation.
5. Not accounting for the “extra” 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 you’ve never owned a home, and particularly if you’re moving out on your own for the first time, you’ll want to tour lots of different home styles and neighbourhoods. When narrowing down your location, consider 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. These will affect the liveability of the home, its current value, and the resale price. To help you make the decision between location and style, click here.
3. Seeing too many homes.
Don’t get us wrong – it’s definitely a good idea to see what’s on the market, if only for the sake of comparison. You’ll gain a better understanding of what comparable homes are valued at, their condition, and your negotiating power. This is valuable intel, whether you’re 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 it’s not in the contract, it doesn’t 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.
You’ve likely heard the term “house poor.” 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.
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