4 common first-time homebuyer mistakes
Ready to enter the housing market? Avoid these common first-time homebuyer mistakes by planning ahead, leaving room for the unexpected and getting financially set up, so you can buy your first home with confidence.
1. Making assumptions
Thoughtful planning is key in avoiding first-time homebuyer mistakes. Avoid jumping to conclusions by gathering all the information you need at every step of the process.
- Get pre-qualified so you have a sense of what you may be able to afford, before getting pre-approved.
- Explore the market you’re interested in to gain an understanding of how many properties are for sale and the types of homes that might fit your needs and budget.
- Talk to a mortgage advisor before you start looking and get your pre-approval sorted. This helps you establish what you can buy and lets you enter the market knowing what you can afford. Pre-qualification is easy to do online, but don’t let anything but a clear pre-approval serve as a basis for your budget.
- It’s tempting to assume a well-staged house has everything you’ve been looking for, but appearances can be deceiving, so use a homebuying checklist during your tour to make sure you’re being thorough.
- Don’t assume that the first mortgage offered is the best one available. Interview different mortgage brokers and ask questions to get informed on all of your options.
2. Moving too fast
Competitive housing markets can make it easy to hurry through a process that needs your careful attention. Give yourself as much time and space as possible at every step of the process, including when you choose an agent, a mortgage broker, or a financial advisor.
- Think about your daily routine and how a new neighbourhood will suit your lifestyle. Consider access to gyms, travel time to work, accessibility to parks, local school districts and building plans for the area. Take the time to walk or drive around at night, on weekends and weekdays to get a sense of what life is really like here.
- Know where your home funding is coming from. If you’re securing a loan, borrowing money from family or waiting on the sale of another asset to buy your home, make sure that the timeline of securing the funds matches when you’ll need it.
- Take time for in-depth inspections and appraisals to properly assess home value and outline any potential issues.
- Get a solid understanding of the property you’re interested in. What are the electrical systems like? When were the home’s systems last updated?
- Research incentives for first-time buyers like tax breaks and government subsidies, or special mortgage incentives from lenders for new Canadian immigrants.
3. Going beyond your limits
The frenetic intensity of a bidding war and a competitive market can make it easy to buy beyond your means; especially if you’re already envisioning yourself living in the home you’ve made an offer on. Just because you have savings that allow a certain amount, or you’re offered a generous pre-approval, doesn’t mean that using everything at your disposal is right for you. A great financial advisor can help keep you in check.
Make an in-depth financial plan to stick to your budget
Make sure you understand closing costs, administrative fees, moving costs, property transfer costs, moving costs, appraisal costs and the price of any potential renovations.
- How much will hydro, energy, internet, cable and electricity be? How will your cost of living change? What will groceries, gas, transit, insurance and memberships cost more in your new neighbourhood? Understand the numbers as they relate to everyday life.
- Do you have savings for emergencies like burst pipes or an unexpected leak in the ceiling?
- What other major life costs do you anticipate? If you have kids who will go to college someday or you’re looking to buy a car, anticipate big-picture costs in your future.
- Will you be purchasing new furniture, bedding, light fixtures, carpets and other home supplies?
- Do you have wiggle room for unexpected costs? Ask your financial planner to help you map out legal fees and administrative costs so you don’t overbudget.
4. Emotional decision-making
Homebuying can be both exciting and stressful. Building a connection to a home can feel like falling in love, but overly excited homebuyers are more likely to make mistakes or knee-jerk decisions that they’ll regret later. In a competitive market, it can be frustrating to make repeated offers and to lose homes you get your heart set on. Prepare yourself for what the process might bring up so you can avoid first-time homebuyer mistakes and make choices you’ll be happy with for years to come.
How can I avoid making emotional decisions as a first-time homebuyer?
- Choose real estate experts you trust and who can guide you through the homebuying process in an objective way, supplying you with information and reminding you to stick to your resolved budget and guardrails. Financial advisors, mortgage brokers, legal advisors and real estate professionals who know their stuff will help guide you back to facts.
- If you’re buying with a partner or other parties, make sure you’re all clear on boundaries and goals. Set regular meetings to talk about how you’re feeling about the process, sharing anxieties, frustrations or goals for the process. Supporting each other through the process can help smooth out conflicts and encourage smart decision-making.
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