Mistake #1: Spending Too Much
It’s important not to get caught up in the moment, so be realistic about what you can afford. The final sale price is the tip of the iceberg, and does not take into account all of the costs involved in owning a home. Houses come with plenty of bills like heating, property taxes, renovations and the occasional unforeseen incident.
What to do: Take a close look at your finances and be aware of your fixed costs. If you don’t already have one now may be a good time to acquire the services of a financial planner. Work out your household budget, and be sure to leave a little space for unexpected bills, or for fun! The Canada Mortgage and Housing Corporation also has plenty of useful online budget calculators, as a general rule your monthly housing costs (mortgage, property tax and heating expenses) should not exceed 32% of your gross monthly income. http://www.cmhc-schl.gc.ca/en/co/buho/buho_022.cfm
Mistake #2: Spending Too Little
Yes, this can also be a mistake! If you spend too little on a home that you may outgrow too quickly, you then run the risk of incurring additional costs to move yet again. Don’t get a two-bedroom home when you know you’re planning to have kids and will want three bedrooms. By the same token, don’t buy a condo just because it’s cheaper when one of the main reasons you’re over renting is because you hate sharing walls with neighbors. It’s true, that you’ll probably have to make some compromises to be able to afford your first home, but don’t make a compromise that will be a major strain.
What to do: Think ahead. Are you planning on starting a family soon? Will you outgrow the house? Perhaps stretching your money a little bit to stay in a house for longer is a more sound financial decision.
Mistake #3: Buying With Your Heart
Sure the house is gorgeous, fully renovated and painted your favourite shade of blue, it has a soaker tub, and great curb appeal… but it is on a very busy road, has no backyard, and will need a new roof in the next couple years. Minor upgrades and cosmetic fixes are an inexpensive way for sellers to fetch a higher price for their homes. If you’re on a budget look for a home whose full potential has yet to be realized!
What to do: Be smart! Visit the house at least twice (you’d be surprised at how your opinion can change on a second and third visit) and think critically. Go through every aspect of the house, every room, every floor, its location and neighbourhood – and really try to picture yourself living in the house years to come. Also, first-time home buyers should always look for a house they can add value to, as this ensures a bump in equity to help you up the property ladder.
Mistake #4: Not Taking into Account Closing Costs
The final sale price of the house isn’t the only cost of buying a home. There are many “closing costs” that should be taken into account when deciding what price range you can afford. Your lawyer fees, transfer taxes and moving costs can all add up.
What to do: Closing costs can be anywhere from 1.5-4% of the final sale price, so be aware and take this into account when determining your budget.
Mistake#5: Not Doing Your Research
Blindly buying a home can be a big mistake. Whether you’re paying too much attention to your friends and family “who just LOVE the place!”, or are feeling the pressure to make a quick buy, moving into a house that hasn’t been thoroughly vetted can be a big, expensive, regretful mistake.
What to do: Do your research! Spend a day walking the neighbourhood, learn about your immediate neighbours, research the local school and visit the parks. As for the house itself, get a home inspection, as these can uncover unseen things like termites and flooding, two expensive undertakings.
Buying a home is exciting and daunting, but with a solid plan and the help of a qualified Realtor you can avoid all of these mistakes, and find yourself in your own home that provides happy, lucrative returns for years to come.