As a first time home buyer, the process can be somewhat overwhelming. Buying a new home and applying for a mortgage can leave you with many unanswered questions. Your Real Estate agent has all the answers to help make the process much easier.
To help make you feel more confident and a little more prepared, we’ve put together a list of common mistakes most first-time home buyers often make and how to avoid them.
- Fearing you won’t qualify for a mortgage. Are your dreams being put on hold because you aren’t sure if you will qualify for a mortgage? Instead of wondering, why not find out? Your Mortgage Specialist will be able to tell you whether or not you qualify for a mortgage. It is an essential first step that will allow you to proceed in buying your home.
- Not knowing about all the down payment choices. As a first time home buyer, you often benefit of having to put a smaller down on your home then you would if you were a returning home buyer. Get informed of all the different options before making a move. The federal government’s Home Buyer’s Plan offers eligibility to first-time home buyers to use up to $25,000 in RRSP savings per person for a down payment on a home ($50,000 for a couple).
- Worrying too much on the interest rate. First-time home buyers tend to focus more on the interest rates rather than the mortgage solution itself. There are different types of mortgages, with different payment structures and terms. These might seem complicated and frighten first time home-buyers, but your Mortgage Specialist will be able to guide you in deciding which fits best for you. Fixed Rate Mortgage: Interest rate stays the same for the term of your mortgage. Advantage? You know exactly how much of your payments are applied to interest. Variable Rate Mortgage: Your payment remains the same. If the rates go down, more of your payment goes to pay the principle, and less is payed as interest. If the rates go up, less of your payment goes to the principal and more to interest. Advantage? Many experts believe it offers greater potential for long-term savings. Combined Fixed and Variable Rate Mortgage: Both variables apply to diversifying your mortgage. It allows you to save long-term while being protected if rates rise.
- Having unrealistic expectations of how much you can afford to pay for your new home. Often, first-time home buyers have a ideal budget they would like to pay for their home. Sometimes it is over-estimated, or even under-estimated. It is better to determine how much you can afford before making any plans.
- Not getting a mortgage pre-approval. This is important before you start searching for a home. That way, you know exactly what your price range is and can look for houses within your budget. The last thing you would want is to find your dream home only to find out afterwards you can’t afford it.
- Choosing the right mortgage payment schedule. Customizing your amortization period is important depending on how much you can afford. The sooner you pay off your mortgage, the more interest you save. On the other hand, you don’t want all your income to go towards your mortgage, leaving you without any cash-flow.
- Not thinking about the closing costs. When buying your first home, most people aren’t aware of the closing costs once your home purchase has been done. It is important to assume you will need an additional 1.5% of your purchase price to pay for all closing costs such as: Professional home inspection, Lawyer or notary fees, Land Transfer Tax, Property tax/utility bill adjustment, Property Insurance, Moving Costs, Ongoing costs. Your Mortgage Specialist or even your Real Estate Agent will be able to elaborate and help you prepare for these closing costs.
- Not knowing your credit rating. Your credit rating is a record of your credit history and current financial situation. Banks will check your credit scores before giving you a loan. A good credit rating will improve your ability to get a loan. Don’t worry, your credit rating can always be improved.