You’ve entered the next stage of your life and are about to make quite possibly the most significant financial purchase of your life. While buying your first home is something to celebrate, it’s important to do your homework to avoid those common mistakes that could cost you down the road.
Here are five of the most common mistakes first-time homebuyers are prone to making and how to avoid them.
Spending all Your Savings on the Down Payment
The down payment on your house will be one of the biggest aspects when buying a home, it’s the initial cost of the sale you pay upfront. The total of your down payment will vary based on the price of the home and amount of mortgage you qualify for. Regardless of the final numbers, you should never put all your savings towards this. Depleting your savings can leave it hard to pay for closing costs, and other fees.
Advice: Instead of spending all your savings on a down payment, aim to have around three to six months of expenses for emergencies, in addition to your down payment and closing costs. An Advisor can help you with a saving strategy that could mean reducing your total down payment, which in turn could mean adding mortgage default insurance fees (a premium charged when the buyer doesn’t put down 20%). Now we know no one likes paying more fees, but it’s better to leave yourself a little financial cushion than being forced to take drastic action, such as borrowing more or worse having to sell your house.
Not Negotiating on the Price
Whether you’re working with a realtor or a real estate agent, assuming they will do the dirty work of negotiating for you might not always be true and you’ll be missing out on opportunities to bargain for what you want. While the price may be firm – don’t discount other factors because everything is negotiable.
Advice: Your agent’s incentive is to close the deal, it’s up to you to provide them direction on your asks. Negotiations can involve having the closing costs covered, an extended move in date, or maybe you want the fixtures or appliances added in. After all, the worse thing the seller can say is no, and you won’t know till you ask!
Not Researching the Neighbourhood
Remember this is where you’re going to live for the next stage of your life and depending on your future goals you want to make sure it has what you’re looking for. Maybe you want a neighbourhood filled with young children as you hope to have your own soon or maybe you’re looking for something a little quieter. But skipping out on researching what’s near can leave you feeling out of place once you’ve already moved in.
Advice: Ask your realtor or real estate agent to show you around the block and create a list of what is important to you to have nearby, this can range from grocery stores, parks, schools, or fitness amenities, this way you and your realtor knows what kind of neighbourhood you’re looking for prior to showings.
Not Asking for a List of Comparable Properties
House shopping can be fun but looking at houses that are beyond your budget and needs can set you up for disappointment. Most real estate agents will provide a list of comparables – homes that have sold recently in the neighbourhood or area you’re considering. However, not all agents are forthcoming with this information.
Advice: The best way to avoid this is being upfront with your requests. If you’re shopping for a two-bedroom, two-bathroom house, ask to see only listings that match these parameters. You can also provide a price listing range to narrow it down even further. This way you’re comparing apples to apples, which helps with negotiating as well.
Waiting for That ‘Unicorn’
Unicorns are mythical creatures, both in nature and real estate. Everyone has a check box of wants and needs going into house hunting but looking for a house that check every one of your boxes to perfection can narrow your choices, might have you missing out on something good in hopes of something better, and lead to overpaying.
Advice: Keep an open mind. Be willing to put in some sweat equity and make it your own. As long as the house meets the fundamental needs, the aesthetics can be changed to match your style or wants. Work with your Advisor to see if you can roll your renovations in your mortgage as well.
Relax, take your time, and do your homework to avoid making these mistakes. Enjoy buying your first home with stability, comfort, and financial wellbeing. Our team of expert Advisors are here to support you through buying your first home and setting you up for financial success for years to come.