The Most Common First Time Home Buyer Mistakes

1. Going House Shopping Without Knowing What You Can Afford
Every first time home buyer should make a list of expenses that they incur every month including hydro, electricity, cable, groceries, entertainment, student loans, car payments as well as their yearly costs including property tax, home insurance, car insurance etc. Subtract this total from your take-home pay and you’ll know how much you can spend on your new home each month.
If you start looking at homes outside of your affordability, you will often be working to live instead of living!.  You may find out that you are not satisfied with size or location of the properties that you can afford so you may try to reduce your expenses or increase your income before you even start looking for your new place.
2. Going House Shopping Without a Mortgage Qualification
What you can afford is not necessarily the same as what you can actually qualify for.  The lender will require you to fill in an application form attaching copies of your T4 statements as well as a list of your expenses and any debt you might have including student loans, car payments, etc.  Your pre approval will also be dependent on how good your credit score is and how stable your income is. 
When a first time home buyer starts looking at properties before they get pre-qualified, they are not only wasting their own time but the time of the seller, the sellers’ agent, and the buyers’ agent. Imagine looking at properties for a month and finally you, the first time home buyer, find a property that you absolutely love so you write an offer on the property.  The buying realtor goes through all the minutes and the inspection with you and you are completely satisfied and excited to remove all the subjects and provide the deposit cheque only to find out that your financing fell through because you were not able to afford the mortgage.  This could easily be prevented by taking the time to get pre-qualified before you start looking.
3. Forgetting to Include Taxes, Fees, Maintenance, Closing Costs and Insurance
After a first time home buyer officially becomes an owner to their first place, they often forget to include the costs that you would not have to incur if you were renting.  Property taxes and condo insurance are charged yearly but you can pay for them on a monthly basis.  Your property taxes will vary depending on the size of the unit and the location and can be tacked onto your mortgage if you wish.  Condo insurance ensures that the contents within your home are protected in case of unexpected events including leaks, earthquakes and fire. 

Maintenance costs are also taken out monthly and vary depending on the size of your unit, the location, the ammenties and the age of the building.  Therefore, when you are looking for a place, make sure you have a list of the monthly expenses you will incur on top of your mortgage payment.  For the annual expenses, take the amount and divide it by 12 and add it to your mortgage payment.  This will provide you with a more accurate idea of what your monthly expenses are.
4. Being Too Picky
Everyone including first time home buyers have a list of what they want their ideal home to be and often times they are fixed on the list and will not even consider homes that do not have every single point on that list.  This is dangerous because you may end up renting for significantly longer than expected and the money that you are putting into rent every month could be put towards your mortgage.  Why pay for somebody else mortgage when you can pay your own?
First time home buyers may have to prioritize what they want as they often have to sacrifice certain items on their list for other things as they often have limited funds for their first purchase.  For example, you may value having a large space but be on a busy street or be on a lower floor or you may value being in the downtown core and so you sacrifice having a smaller home to be downtown. 
You could continue to rent until you find your ideal place but this could mean that you will be renting for another couple of years and you have to ask yourself, how much of that money could have been invested in my own place?
5. Rejecting a Great Place Because of Lack of Vision
You may not like the finishings of the inside or the appliances may be outdated however you should not reject a place for those reasons.  All of those things can be changed in time.  When a first time home buyer walks through a unit, they should be looking for whether they like the layout of the home.  Everything else can be changed over time when more funds are available.  As mentioned above, you could continue to rent until you have enough money to renovate everything before you move in however are you willing to invest more money into someone elses mortgage when you could be starting your own real estate portfolio?
6. Being Swept Away by Staging and/or Minor Upgrades
Repainting a unit and changing floors often does not cost much for the seller but will increase the value of the property tremendously.  The owner could spend about $10,000 in minor upgrades but add $40,000 onto the purchase price.  As a first time home buyer purchasing on a budget, look for homes that may need a little work so that you can maximize the equity in your property later on when you decide to sell or purchase another property.
7. Compromising on the Important Things
If you are planning on expanding your family in the near future don’t purchase a studio or one bedroom.  If you are extremely sensitive to noise don’t buy in a wood frame building.  Some things on your list are non-negotiable.  Make sure you keep it that way otherwise you will be living in a home that you will be unhappy with for the next year or two.
8. Getting Your Heart Set on a Home Before It’s Been Inspected
Don’t let your emotions get in the way of your decision.  Many times first time home buyers have their heart set on the home the moment they get an accepted offer.  Make sure you that you are still rational when the inspection is done otherwise you may end up with a property that will cost you alot more after you move in than it is worth. 
9. Not Choosing to Hire an Agent or Using the Seller’s Agent
Always make sure you hire an agent to represent you.  First of all, it is free for the buyer as the seller pays for both the buying and the selling agent so why not take advantage of the expertise and knowledge of the buying agent?  Using the selling agent to represent you is not in your best interest as the sellers agent will always be working on the interest of his/seller first and foremost. 
10. Not Thinking About the Future
When you are purchasing your first place, make sure you ask your agent about the area you are purchasing in.  Ask yourself,” is there is potential for growth in the area?”.  You may also want to forecast how long you plan on living in this first home and what is your ultimate purpose for purchasing this home.  You may be purchasing this home as a temporary place that you will eventually rent out and then purchase something bigger two or three years down the road.  You may want to purchase a house in 5 years so this home that you are purchasing may eventually be that investment property so you need to consider how much rent you can get in that area, the vacancy rate in the area, etc.
Purchasing your first home can often be an exciting but often overwhelming experience.  If you have any other questions or concerns about purchasing as a first time home buyer, please don’t hesitate to contact me at 604-780-7877

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