5 Common Mistakes to Avoid for First Time Homebuyers
Buying your first home? Congratulations! It’s an exciting time! However, we don’t want you to make these common first-time homebuyer mistakes.
Without some guidance, your excitement and celebration can quickly turn to regret. We’ve seen it happen! New home buyers come to us after months of searching, losing out on homes, or even buying their second home… after their first home buying experience landed them in a mess.
With a little bit of leg work upfront, you can save yourself major hassles, and keep the home buying experience fun and successful.
Here are the five most common mistakes we see homeowners make, and how you can ensure you don’t fall into the same traps.
Not Hiring a Realtor (Or Hiring the Wrong One)
When your parents were buying their first home, they may not have used a realtor, or may have, at some point, sold a home ‘by owner.’ But times have changed, and the market is much more volatile than it used to be.
Realtors do more than just take you to see properties that are for sale. A few of the services realtors provide that you can’t do for yourself:
- Watch your back when signing contracts
- Give you detailed information about neighbourhoods and communities
- Show you properties that may be coming for sale (but aren’t available to the public yet)
- Tell you about new builds or up-and-coming buildings that are hitting the market soon
- Help you negotiate the price for a better chance at securing your property
- Do really good research based on your preferences – they have access to phenomenal databases
- Use their network to help you find a mortgage lender, home inspector, or lawyer (if necessary)
- Put in your offer and handle all the necessary paperwork
- Help you negotiate repairs or property upgrades as part of your sale
One exceptional reason that deserves highlighting is that a realtor knows home buyer incentive programs you may not know about. For example, in Ontario, you can get a refund of all or part of your home’s land transfer taxes. Other programs may exist as well, and your realtor may be able to help you save thousands off the cost of purchasing your home.
Above all, a realtor is an expert ally to go through this process with, help you avoid making poor choices, and navigate the intricacies of your first home purchase.
Not Getting Pre-Approved For Your Mortgage
You may know what mortgage payment you feel you can afford to pay each month. With plenty of mortgage calculators online, it’s easy to figure out an estimate of what you will be approved for. However, without actually getting pre-approved, you don’t really know for sure and you could end up wasting time looking at homes you can’t afford.
Banks take many things into consideration when deciding how much they will lend you. According to Fidelity.com, the top 5 things your bank will consider are:
- Your credit score – Having a lower credit score doesn’t mean you can’t get a mortgage, but it may affect the interest rate you can secure. That can dramatically affect your monthly payment.
- Your debt-to-income ratio – If you have student loans, credit card balances, or other debt, your lender may offer you a smaller mortgage.
- Your down payment – You don’t actually need a full 20% down payment in most scenarios. However, if you don’t have your 20% ready to put down, you will need to purchase additional mortgage insurance which will affect your monthly payment.
- Your work history – You need to be prepared to show where your income comes from.
- The value and condition of the home – At the end of the day, you’ll have to prove to your lender the home you want to buy is worth the money they are lending you. They’ll take into account the area, the home inspection, and comparable homes in the neighbourhood.
Getting pre-approval also allows you time to get a few different interest rate quotes. One bank may give you a better rate, or even offer you a larger loan.
Not Getting a Home Inspection
Thinking of skipping your home inspection? Think again! It may be tempting to skip it, especially when you’ve found a home you love, if it’s newer, or if you’re purchasing from someone you know. Plus, arranging an inspection requires time and additional money. But rest assured, this is the best money you’ll spend in the entire home buying process.
Inspections aren’t only to catch people hiding problems with their home (although some people are doing that too). Sometimes, there are issues arising with the house the homeowners don’t even know about. Some may be minor, but some may be more extensive… and expensive!
We recommend you attend the inspection in person to learn about your home. The inspector can often give you insight into how serious issues are so you have clarity about your purchase.
Psst: Did you know Justo includes a home inspection as part of our packages? No extra fees! Yay!
We count this as a mistake many homeowners make because there are plenty of hidden gems that are overlooked due to their curb appeal. If HGTV has taught us one thing, it’s that a little elbow grease and some TLC can seriously transform an aged house into your dream property, and often, for much less than a newer home.
We know new properties have a certain shine that easily catches your eye. And there’s nothing wrong with wanting something new! However, if money is tight or you’re looking for a truly unique and personalized home, take a look at a few older properties. A bit of hard work may get you a lot more home than you thought possible.
Learn About the Costs of Updating Before You Buy
Almost every home you look at will need some amount of updating. You might not need to go full Joanna Gaines on your new home, but you’ll likely want to redecorate a bathroom, rip up some old carpet, or replace the countertops.
If the esthetic is a dealbreaker for you and you feel you absolutely must remodel, make sure you explore the costs of your updates before you buy.
Construction costs, flooring prices, and labour costs fluctuate quite a bit. You can’t base your remodel costs off your sister-in-law’s bathroom re-do from three years ago. Get a few quotes, ask around, and have a good estimate under your belt. You may even be able to get a bit of extra money from your lender to put into renovations if you do your homework.
At Justo, we want you to LOVE your home, and LOVE your homebuying process. We specialize in helping people like you buy your very first home. Our friendly realtors are ready to help you with every step of this exciting (but confusing) process — all while saving you thousands of dollars!
Ready to get started? Not even sure where to start? It’s ok! Contact us to start working on a plan today.