Errors First Time Home Buyers Should Avoid
Buying a home is a very important decision for a first time home buyer. In fact, it’s one of the most significant investments any person makes. As such, it pays to be properly informed and educated about common pitfalls that those new to the process typically make.
Not Property Determining Your Budget
Buyers are sometimes drawn to looking at homes online and through open houses. This inevitably leads some to become excited about homes outside their qualified price range which they can’t afford. So expectations are not in line with financial reality. Some do the opposite and set lower price bounds which are less than they can actually afford. However, they are also drawn to pricier homes, but in this case can actually afford them. What tends to happen in these instances is we finally move up to the mortgage qualified upper bound, because buyers normally want the best home they can actually afford. It’s important to get a mortgage pre-approval from a broker or bank. This is a commitment that states what you can afford & the interest rate which the institution will lend at. It is guaranteed for 90-120 days.
Not Understanding About Different Kinds of Financing
There are several different mortgage options on the market these days, from variable, to fixed, to open, to closed. This can be intimidating for some buyers. It’s important to be aware of the interest rates of course, and this is what many buyers focus on. However, there are other factors that can be quite important and which are often ignored, including amortization, prepayment privileges (which differ by
Not Recognizing that Closing Costs Have To Be Budgeted For
Most buyers are aware that they have to save for a down payment. However, there are other costs involved with a home purchase, and which must be paid prior to taking possession. These include lawyer’s fees, land transfer tax (both provincial and potentially city), title insurance, home insurance, moving costs, and the like. First time buyers are eligible for the First Time Home Buyer’s Plan & for land transfer tax credits & these are things that should be researched and considered.
Not Using a Qualified Professional
There is a wealth of information out there about the home buying process, and buyers have more access to it than ever before. In addition, more and more people are getting realtor licenses for business purposes, but are not fully focused in this field. It’s critical that you work with a professional who is dedicated to the job full time, who knows exactly what you’re looking for, and who is familiar with a variety of neighbourhoods in the city. If they’ve either sold homes there or helped buyers find homes there, even better. Ask questions and work with someone you can be confident in.
Buying a Home in the Wrong Location or Buying an Unsuitable Home
It’s important for home buyers to make a list of ‘must haves’ and ‘would like to have’. One should prioritize what is Important, including housing style, size of backyard, number of bedrooms, bathrooms, whether the basement is finished etc. Also, one should consider location and neighbourhood. Are you familiar with the area and its amenities? Can you live there? Sometimes locational issues are more important than the house itself, depending on your work hours and life stresses.
Buying a home for the first time can be an intimidating proposition. While there's a lot of information on the web, nothing can substitute for the advice and expertise of qualified professionals in this field, whether it be your realtor, your lawyer or your banker. I recommend getting their help before you set out on the journey to buying a home. It will be time well spent.
Ram Rajendram is a Toronto Real Estate Broker with Century 21 Harvest Realty Ltd., Brokerage. He sells condos & houses throughout the GTA & assists home & condo buyers with their purchasing needs. He is also a Canadian Chartered Accountant (CA) & holds a Bachelors Degree in Economics from the London School of Economics (LSE)