Six First Time Home Buyer Mistakes
March 31, 2017 | Posted by: Steve Dainard
Buying your first home is an exciting experience with lots of decisions to be made, but there are some costly (and common) mistakes you can avoid by knowing what to expect, doing your research and consulting qualified professionals from across Niagara.
There are critical steps to follow and actions you should take during the home buying process to protect yourself and your investment, and missing just a couple can mean wasting time or money during a time when both will be in short supply.
Here are the top six mistakes first-time homebuyers make:
Not understanding your credit score
Your credit score is an assessment of your financial health at a specific time, and lenders use it to judge how much of a risk they’d be taking if they were to approve you for a loan. As whichmortgage.ca (Canada’s Independent Mortgage site) notes, past behaviour is a sound indicator of future behaviour. That means not paying your bills on time, accumulating debt or declaring bankruptcy can have an incredibly negative impact on your ability to get future loans.
Specific lenders may use their own scales, but you generally want to aim for a credit score of 700 or above (on a range of 300 to 900) to ensure you’re in good standing. Keep your score high, stay as debt free as possible and lenders will look more favourably on you.
Forgetting the mortgage pre-approval process
Before you start searching for a new home, you want to know how much money you have available to spend. Qualifying for a pre-approved mortgage means you’ll know the size of mortgage you can take on, and you’ll be guaranteed a mortgage rate for a specific period-of-time.
As the Financial Services Commission of Ontario notes, getting pre-approved for a mortgage does not guarantee you’ll be approved for a mortgage loan, it will provide you with a budget range you’ll want to keep in mind to avoid wasting time or being disappointed later.
Choosing the wrong mortgage and terms
There are so many decisions to make when it comes to picking the right mortgage - what will your amortization period be? What about the payment terms? Should you choose open or closed, fixed or variable? And how can you pay your mortgage down more quickly if you have the means to do so? The array of options can be dizzying, but choosing the wrong ones can have you wasting money. For example, choosing a fixed rate mortgage would be the best option if interest rates were projected to increase soon.
Try our easy to use mortgage calculators to learn how your interest rates, amortization schedule and more will affect your mortgage and how you’ll pay it.
Jumping into a purchasing decision
To make your new home a worthwhile investment, you’ll want to spend at least the next
five to seven years there (that’s half a decade or more!). While there may be dozens of attractive houses across Niagara which are on the market right now and that tick at least some of the boxes on your must-have list, it’s worth taking the time to weigh your options and choose the one that will best serve your needs today and for years to come.
Remember to do your homework in terms of confirming your finances are in order, looking beyond the curb appeal of the property to make sure the structure is sound and your stipulations are met, and that the size and location fits your current and future requirements.
Failing to account for all costs
As with any significant purchase (and purchasing a home is arguably the largest one you’ll make), there are extra costs you should consider on top of the final sale price. As this HGTV.ca article notes, spending realistically within your budget so you can afford heating, property taxes, repairs and future renovations is critical. Keep in mind that monthly housing costs should not exceed 35% of your gross monthly income.
Not seeking professional, independent advice
Just like you’d use a licensed plumber to repair a leak or call a contractor for renovations, consulting trusted professionals during the purchasing process is a must. As a mortgage advisor serving clients across the Niagara region, I provide qualified and professional expertise to first-time homebuyers just like you every day. I have access to multiple lenders and can help you find the best mortgage rates, guide you through the process and explain all those terms and conditions in plain language so you can make your purchase decision with confidence.
Please look at our Frequently Asked Questions to learn more about mortgage rates, mortgage loan insurance, purchasing, home ownership costs and more.
We regularly receive short-term rate promotions that aren’t posted online. Review our latest lending rates and contact us for more information.