Buying your first home can be exciting and amazing, and scary. But knowing the common mistakes of first-time buyers will ensure you don’t make the same ones, and can help make the transition to "New Home Owner!" that much smoother.
1) Spending Too Much
It’s important to be realistic about what you can afford. The final sale price isn’t the only cost to take into account when owning a home. Houses come with plenty of bills like heating and property taxes, future renovations and occasional unforeseen costs like burst pipes or city trees needing to be trimmed.
What you can do about it: Take a close look at your finances. Be aware of your current fixed costs and always leave some breathing room. Ask the homeowners what they spend in a year on their bills so there aren’t any surprises. Canada Mortgage and Housing Corporation has plenty of useful online budget calculators to help. As a general rule your monthly housing costs (mortgage, property tax and heating expenses) should be no more than 32% of your gross monthly income.
2) Spending Too Little
Yes, this can also be a mistake! If you spend too little on a home that you’ll outgrow quickly, you’ll incur the expense of moving (which can be quite pricey) perhaps before you need to.
What you can do about it: Think ahead. Are you planning on starting a family soon? Will you outgrow the house? Perhaps stretching your money a little bit to stay in a house for longer is a more sound financial decision.
3) Buying With Your Heart
Sure the house is gorgeous, fully renovated and painted your favourite shade of cream and has an ensuite bathroom for every bedroom. But it’s on a busy road and you have three young kids and two cats who like to run outside.
What you can do about it: Be smart! Visit the house at least twice (you’d be surprised at how your opinion can change on a second and third visit) and think critically. Go through every aspect of the house, every room, every floor, its location and neighbourhood and really try to picture yourselves in the house for years down the road.
4) Missing Hidden Closing Costs
The final sale price of the house isn’t the only cost of buying a home. There are many "closing costs" that should be taken into account when deciding what price range you can afford. Your realtor’s commissions, lawyer fees, transfer taxes and moving costs can all add up.
What you can do about it: Closing costs can be anywhere from 1.5-4% of the final sale price, so be aware and take this into account when determining your budget.
5) Not Doing Your Research
Blindly buying a home can be a big mistake. Whether you’re paying too much attention to your realtor and family “who just LOVE the place!” or are feeling the pressure to make a quick buy, moving into a house that hasn’t been thoroughly vetted can be a big, expensive, regretful mistake.
What you can do about it: Do your research! And do it first-hand. No realtor or family member can know exactly what you want more than you. Spend a day walking the neighbourhood, learn about your neighbours, research the local school and visit the parks. As for the house itself, get an inspection report. These can uncover unseen things like termites and flooding, two expensive undertakings.
Buying a home is exciting and daunting. But doing your due diligence can make the process a little easier, and get you into your dream home with (little) stress.
And there's more to come...