(Photo courtesy of Nan Palmero via Flickr)
Purchasing a home for the first time is replete with stresses and financial pitfalls.
With the luxury of hindsight, we’ve assembled a list of some of the most common mistakes first-time buyers make, and suggestions on how to avoid them:
1. Buying More House Than You Can Afford
Before you consider what you can afford to pay for a home, you must prepare a budget.
Figure out your monthly expenses, minus your rent or current mortgage, and determine what you can comfortably afford to pay on top.
Be sure to use a mortgage calculator when you consider the numbers, and remember the additional costs of homeownership (repairs, upgrades, property taxes).
2. Limiting Your Search And Your Searcher
Often a first-time buyer will rely solely on open houses and real estate websites to discover what’s on the market.
But be sure to engage a real estate agent, as they will be able to provide you with purchase opportunities before they are listed, as well as undisclosed property information and non-public listings.
And be sure to engage the right real estate agent for you. The relationship is key. So ask around, and be sure to meet with a few different realtors before making your decision. You want someone who understands and can represent your unique needs.
3. Not Thinking About Your Future Home
We’re so often swept up in the excitement of a first-time home purchase that we forget to think long-term. Most first-time buyers will one day buy their second home, so resale is always a factor.
Consider that you may only be in your starter home for a few years. Does it have enough appeal to interest an eclectic mix of buyers down the road?
4. You Hold Out For Your Dream Home Complete With Decor
Don’t wait to find a home that checks everything off on your list. It is not realistic to expect to find all that you want in a first home.
And remember that the open house you fall in love with has very likely been staged. That decor doesn’t come with the deal.
Better to purchase something that falls slightly short of your wishes, so that you can make practical upgrades and build some equity in the home.
5. You Don't Take The Time To Fully Investigate Or To Do Your Due Diligence
Buying a first home is an emotional experience. Don’t let your excitement overwhelm your sense of reason.
Be sure to procure a home inspection. And don’t rely on a floor plan to properly represent room sizes and flow.
Visit the home yourself — on more than one occasion — and use your own eyes to confirm the dimensions and layout.
Also, ask for a list of comparable sales in the neighbourhood. You need to understand the range of prices for similar homes. And consider the neighbourhood — not just the home. The perfect home matters little without access to transit, parks, culture and good schooling.
6. Making Too Small A Down Payment At Too Low An Interest Rate
A first-time home purchase is a daunting investment. And while it’s tempting to spend as little money upfront, and to wait for the lowest possible interest rate, don’t disregard the effect of that going forward.
You want to wait to purchase until you have enough of a deposit to ensure manageable monthly mortgage payments.
And too low of an interest rate is sure to mean plenty of restrictions and penalties should you default.
Life can throw a few curve balls your way; don’t be swayed by short-term gain.
