Buying your first home is an exciting but often overwhelming experience.  Being a first time home buyer specialist, I have spent 5 years identifying the needs of first time home buyers and have found that some common mistakes these purchasers often have. 

·         Being unrealistic about how much you can afford to pay for your home.

Often purchasers over or under estimate how much they can afford.  Unless you are paying all cash for your purchase, it is essential that you go to a bank to get a preapproval.

·         Not considering a preapproval

A preapproval is extremely important because it provides you with the confidence to begin looking at homes within your price range.  The worst feeling in the world is when you have been looking at properties for three to six months in the price range that you think you can afford when in fact you find out after you have put in an offer on a property that you love that you can not afford it. 

·         Thinking you won’t qualify for a mortgage

Always check with your mortgage broker before making that assumption.  You would be surprised at how often purchasers assume they can’t get a mortgage because they don’t have a perfect credit rating.  In fact, banks and mortgage brokers have many creative ways to find you solutions to that minor problem.

·         Forgetting about the RRSP contribution and not understanding all the down payment options

First time home buyers are eligible to use up to $20,000 of the RRSP per person towards their down payment of their home.  This withdrawal is not taxable as long as it is repaid within a 15 year time period.  In order to be able to use your RRSP, the funds must have been in your RRSP account for at least 90 days.

·         Focusing too much on the interest rate rather than the overall solution

Interest rates definitely are important. However the actual mortgage itself whether it is variable or fixed rate is even more important.  It is dependent on your lifestyle and your preference. 

Fixed rate mortgages offer security by locking in your interest rate for the term of the mortgage.  So if you fear that rates will increase and don’t want to worry about monitoring the rate, then you would want to go with a fixed rate.  In this way, your interest rate stays the same and your monthly payment stays the same for the term of the mortgage.

With variable rate mortgages, your payments are also the same regardless of the changing interest rates. When rates go down, more of your payment goes to pay the principal and less to interest which allows you to pay off your mortgage sooner.

·         Forgetting about your closing costs

Most first time home buyers forget about the closing costs.  They are detailed below:

Professional home inspection

Home inspections are usually done after an offer has been written and range from

$250 to $450.  For new homes, purchasers will not require an inspection.

Lawyer and notary fees

Upon removing subjects, the purchaser will need to select a lawyer and the cost depends on whether you select a notary or a lawyer but the cost can range from $450-$1000.
Property transfer tax

Property transfer tax is 1% of the first $200,000 of the home price and 2% on the remainder. 

Property tax

This is dependent on the city assessment of your property and will be adjusted at the lawyers upon completion of the property
Property insurance

Insurance for condo units range but you can get covered for a year for as low as $250

Moving costs

Hopefully you have some amazing friends that will help you out.  But if not, it can cost you anywhere from $80 to $200

I hope that this article was useful to all the first time home buyers out there.  Please feel free to call me anytime at 604-780-7877 or to visit my website at www.leilanihomes.com.  Being a first time home buyer a few years ago, I can understand all the emotions and thoughts you may be going through.  If you just need some advice, don’t hesitate to call.  I am always here to help.