Mia’s tips on how to avoid these first time home buyer mistakes
1. Looking for a home before applying for a mortgage
Many first-time buyers make the mistake of searching and visiting homes before ever getting in front of a mortgage lender. How this affects you: You might get behind the ball if a home hits the market you love. You also might look at homes that, realistically, you can’t afford. In this fast-moving seller’s market, most homeowners don’t even want a non pre-approved home buyer to look at their homes. This being the situation in most Montreal & surrounding areas, the seller will most likely not even entertain an offer from a non pre-approved buyer.
What to do instead: Before you fall in love with that gorgeous dream house you’ve been eyeing, be sure to get a fully underwritten pre-approval. Without that pre-approval letter, you may lose the home of your dreams to another, pre-approved buyer. Being pre-approved sends the message that you’re a serious buyer and ready to purchase their home. PLUS, It’s free and you are locking in your low interest rate for months.
I can provide you with professional mortgage specialists to move forward in purchasing your dream home.
2. Buying more house than you can afford
It’s easy to fall in love with homes that might stretch your budget, but overextending yourself is never a good idea. And with home prices still rising, this is easier said than done.
How this affects you: Buying a home that exceeds your budget can put you at higher risk of losing your home if you fall on tough financial times. You’ll also have less wiggle room in your monthly budget for other expenses and much needed vacations. (What is the point of having that walk-in closet if you can’t afford to put your shoe collection in it)
What to do instead: Focus on what monthly payment you can afford rather than fixating on the maximum loan amount you qualify for. Just because you can qualify for a $500,000 loan, that doesn’t mean you can afford the monthly payments that come with it. Factor in your other obligations that don’t show on a credit report when determining how much you can afford while living comfortably.
3. Making decisions based on emotion
Buying a house is a major life milestone. It’s a place where you’ll make memories, create a space that’s truly yours, and put down roots. It’s easy to get too attached and make emotional decisions, so remember that you’re also making one of the largest investments of your life. With this being a strong seller’s market, a lot of first-time buyers are bidding over what they are comfortable with because it is taking them longer than usual to find homes.
How this affects you: Emotional decisions could lead to overpaying for a home and stretching your budget beyond your means.
What to do instead: Have a budget and stick to it.
4. Not Making an Informed Offer
A common home-buying mistake is letting your emotions dictate the offer. Instead, only make an offer if you’re really serious about buying a property and make sure it’s based on comparable sales, rather than just how much you like the house.
How this affects you: You could potentially be losing your chance of getting the home based on a low ball offer or, overpaying when you could have gotten a better deal. Ultimately the price should reflect the market value of the home. The ideal negotiation is when the buyer and seller both feel like they’ve won.
What to do: Call me so we can go over the most recent market activity in your area of interest.
5. Not Performing Due Diligence
While the seller has a duty to you to answer any questions you have about the home honestly, you have a duty to protect yourself by performing various inspections before you fully commit to purchase the home.
What to do instead: Hire a professional home inspector to go over the home’s major systems. While these
inspections are visual, an experienced inspector will notice problems that the untrained eye won’t. With these insightful warnings from the inspector, we will know what immediate repairs need to be tended to arming us with our negotiation.
6. Taking on Credit While Closing
Taking on new debt while you’re buying a house actually creates a delay in the closing process. If you borrow money, it changes your credit score and it’ll send your mortgage approval back to the drawing board. Save yourself the trouble & maintain your finances from pre-approval to closing. Don’t purchase anything that could change your credit history. And while you’re at it, make sure you’re up-front with your lender about all your payment obligations (like child support). Otherwise, these issues could change your debt-to-income ratio, which means it will take much longer for you to buy your dream home.
7. Lacking Vision
Lacking vision of how much potential a home actually has in store for you. Being too picky about wallpaper, paint, carpeting, or a tacky backsplash are not reasons to move onto the next home. It is important to look at the overall elements of the home that are meeting your needs in terms of neighborhood, space, quietness, special features, and being close to amenities that parallel with your lifestyle. Besides, doing home upgrades yourself, even when you have to hire a contractor, is often cheaper than paying the increased home value to a seller who has already done the work for you. And you can do them according to your taste.
8. Not Considering Additional Expenses
Once you’ve received your pre-approval amount, it can be tempting to make an offer on a home at your maximum budget. Try to not give into that temptation. When you purchase a home, you take on expenses you didn’t incur when you rented a home. The ongoing maintenance of the home falls on your shoulders, so it’s important to leave enough room in your housing budget. I always counsel my clients about what information we must request from the seller, to ensure there are no surprises once they’ve moved in.
I’d love to be of value to you in your home purchasing process and to help you develop a home purchase strategy that will avoid all of these mistakes and more.
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T: 514.668.5164 E: mdrymousis@sothebsyrealty.ca