10 First-Time Homebuyer Mistakes

First-Time Home Buyer Raymond Walia 22 Apr

As a first-time buyer, there are some homebuyer mistakes you should avoid to ensure a smooth and successful experience:

THINKING YOU DON’T NEED A REAL ESTATE AGENT

You might be able to find a house on your own, but there are still many aspects of buying real estate that can confuse a first-time buyer. Rely on your agent to negotiate offers, inspections, financing and other details. The money you would have saved on commission can be quickly gobbled up by a botched offer or overlooked repairs.

GETTING YOUR HEART SET ON A HOME BEFORE YOU DO YOUR HOMEWORK

The house that’s love at first sight may not always be what it seems, so keep an open mind. Plus, if you jump in too fast you may be too quick to go over budget or you might overlook a potential pitfall.

CHOOSING A FIXER-UPPER BECAUSE THE LISTING PRICE IS CHEAPER

That old character home may have loads of potential, but be extra diligent during the inspection period. What will it really cost to get your home to where it needs to be? Negotiating a long due-diligence period will give you time to get estimates from contractors in case you need to back out.

COMMITTING TO MORE THAN YOU CAN AFFORD

Don’t sacrifice retirement savings or an emergency fund for mortgage payments. You need to stay nimble to life’s changes and overextending yourself could put your investments—including your house—on the line.

GOING WITH THE FIRST AGENT WHO FINDS YOU

Don’t get halfway into house hunting before you realize your real estate agent isn’t right for you. The best source: a referral from friends. Ask around and take the time to speak with your potential choices before you commit to a realtor.

DIVING INTO RENOVATIONS AS SOON AS YOU BUY

Renovations may increase the value of your home, but don’t rush. Overextending your credit to get upgrades done fast doesn’t always pay off. Take time to make a solid plan and the best financial decisions. Living in your home for a while before renovating will also help you plan the best functional changes to the layout.

CHOOSING A HOUSE WITHOUT RESEARCHING THE NEIGHBOURHOOD

It may be the house of your dreams, but annoying neighbours or a nearby industrial zone can be a rude awakening. Spend some time in the area before you make an offer and talk to local business owners and residents to determine the pros and cons of living there.

RESEARCHING YOUR BROKER AND AGENT, BUT NOT YOUR LAWYER

New buyers often put all their energy into learning about mortgage rates and offers. But don’t forget that the final word in any deal comes from your lawyer. Like finding a real estate agent, your best referral sources for a lawyer will be friends and business associates.

FIXATING ON THE LOWEST INTEREST RATE

A reasonable interest rate is important, but not at the expense of heavy restrictions and penalties. Make a solid long-term plan to pay off your mortgage and then find one that’s flexible enough to accommodate life changes, both planned and unexpected. Be sure to talk your Dominion Lending Centres mortgage professional to learn more.

OPTING OUT OF MORTGAGE INSURANCE

Your home is your largest investment, so be sure to protect it. Mortgage insurance not only buys you peace of mind, it also allows for more flexible financing options. Plus, it allows you to take advantage of available equity to pay down debts or make financial investments.

If you are ready to search for your first home, don’t hesitate to reach out to me today for expert advice you can count on.

Published by: DLC Marketing Team

Closing Day

First-Time Home Buyer Raymond Walia 19 Feb

Phew, you made it. Closing day is one of the most exciting moments where all the house hunting and paperwork really pays off! It is on this day that you will want to make use of your lawyer or a notary.

To complete the process of closing the sale, your lender gives your lawyer the mortgage money. You would then pay out the down payment (minus the deposit) and the closing costs (typically 1 to 4% of the purchase price). Typically, this payment is done through a bank draft, which will require a bank run ideally 10 days before closing, which is then brought to the lawyer on your closing date. From there, the lawyer or notary then pays the seller, registers the home in your name and gives you the deed and the keys!

Congratulations, you are now a home owner!!

Published by DLC.

Financial Approval

First-Time Home Buyer Raymond Walia 19 Feb

You’re almost there! Financial approval is the last step to getting your mortgage and buying your first home! You will need to keep in mind that just because you are pre-approved, it doesn’t guarantee that the final mortgage application is approved. Being entirely candid with your home-buying team throughout the process will be vital as hidden debt or buying a big-ticket item during your 90-120-day pre-approval can change the amount you are able to borrow. It is best to refrain from any major purchases (such as a new car) or life changes (such as changing jobs) until after closing and you have the keys to your new home!

Published by DLC.

Mortgage Pre-Approval

First-Time Home Buyer Raymond Walia 19 Feb

While this may seem similar to pre-qualification, the pre-approval process requires submission and verification of your financial history to ensure the most accurate budget to fit your needs.

As a result, getting pre-approved can help determine:

  • The maximum amount you can afford to spend
  • The monthly mortgage payment associated with your purchase price range
  • The mortgage rate for your first term

Not only does getting pre-approved make the search easier for you, but helps your real estate agent find the best home in your price range. Temptation will always be to start looking at the very top of your budget, but it is important to remember that there will be fees, such as mandatory closing costs, which can range from 1 to 4% of the purchase price. Factoring these into your maximum budget can help you narrow down a home that is entirely affordable and ensure future financial stability and security.

Getting pre-approved doesn’t commit you to a single lender, but it does guarantee the rate offered to you will be locked in from 90 to 120 days which helps if interest rates rise while you are still shopping. If interest rates actually decrease, you would still be offered the lower rate. Another benefit to pre-approval is that, when it comes time to purchase, pre-approval lets the seller know that securing financing should not be an issue. This is extremely beneficial in competitive markets where lots of offers may be coming in.

PROTECTING YOUR PRE-APPROVAL

  • Refrain from having additional credit reports pulled once you have been pre-approved
  • Refrain from applying for new credit, closing off credit accounts or making large purchases until after the sale is complete
  • Be prepared to show a paper trail – any unusual deposits in your bank account may require explanation. Also, if your down payment comes from savings, the bank will want 90 days of statements to ensure the funds are accounted for.

Published by DLC.

Mortgage Pre-Qualification

First-Time Home Buyer Raymond Walia 19 Feb

Once you have your down payment and are ready to realize the dream of owning your first home, you must get pre-qualified!

This process provides you with an estimate of how much you can afford based on your own report of your financial situation. The benefit of this is that it sets the baseline for a realistic price range and allows you to start looking for that perfect home within your means! Now this process is not a mortgage approval, or even a pre-approval but it helps to establish your budget. You must supply an overview of your financial history (income, assets, debt and credit score) but the real requirements come with the pre-approval process where you submit your actual documentation.

Published by DLC.

The Down Payment

First-Time Home Buyer Raymond Walia 19 Feb

Regardless of whether you choose a mortgage professional or traditional bank, the first step begins with your down payment.

The minimum down payment on any mortgage in Canada is 5 percent but putting down more is beneficial whenever possible as it will lower the amount being borrowed. However, if you can only afford the minimum that is perfectly okay! Just remember, if you are putting down less than 20 per cent to purchase your home, default insurance will be mandatory to protect the investment.

Ideally, individuals looking to purchase their first home will have built up a nest egg of savings that they can apply towards a down payment. However, we know this is not possible for everyone so if you don’t have it all saved, don’t worry! Besides being a vital savings plan for retirement, RRSPs can be a great resource for first-time home buyers and can be cashed in up to $35,000 individually towards a down payment. In fact, most mortgage professionals will tell you nearly half of all first-time buyers use their RRSPs to help with the payment. Those first-time buyers who choose this option will have 15 years to pay it back and can defer these payments for up to two years if necessary. Always remember though, deferring a payment can increase the time to pay off the loan and you will still owe the full amount!

Another option for securing your down payment is a gift from an immediate family member, typically a parent. All that is required for this is a signed Gift Letter from the parent (or family member providing the funds) which states that the money does not have to be repaid and a snapshot showing that the gifted funds have been transferred.

Published by DLC.

Buying Your First Home

First-Time Home Buyer Raymond Walia 19 Feb

If you’ve decided to take the plunge, you now need to start by figuring out what you can afford. Fortunately, there are all kinds of calculators and tools available. A great place to start is the free My Mortgage Toolbox app which can help you find a mortgage professional in your area. A mortgage professional is a great alternative to traditional banks and can help you find the best rate in the market, as well as save you time by doing the leg work for you!

Published by DLC.

Do You Know The Costs?

First-Time Home Buyer Raymond Walia 19 Feb

There are two major costs associated with home ownership – let’s make sure you’re ready to take it on!

Upfront Costs: The initial amount of money you need to buy a home, including down payment, closing costs and any applicable taxes.

Ongoing Costs: The continued cost of living in a home you own, including mortgage payments, property taxes, insurance, utility bills, condominium fees (if applicable) and routine repairs and maintenance. It is also important to keep in mind potential major repairs, such as roof replacement or foundation repair, that may be needed now or in the future. In addition, if you choose a property that is not hooked up to municipal services (such as water or sewer) there may be additional maintenance costs to consider.

Published by DLC.

Are You Ready For Home Ownership?

First-Time Home Buyer Raymond Walia 19 Feb

Before you jump on in, there are some things you should ask yourself. As amazing as it is to be a first-time home buyer, it is important to remember that this is likely the largest financial decision you will ever make. There are a few questions you can ask yourself to make sure you’re ready to take this incredible leap!

  1. Are you financially stable?
  2. Do you have the financial management skills and discipline to handle this large of a purchase?
  3. Are you ready to devote the time to regular home maintenance?
  4. Are you aware of all the costs and responsibilities that come with being a homeowner? Let’s find out!

Published by DLC.

Overview

First-Time Home Buyer Raymond Walia 19 Feb

Being on the path to purchasing your first home is one of the most exciting and most rewarding moments in life! While people don’t always dream of the perfect mortgage, we do grow up dreaming of a white picket fence and our dream home. Even if you imagined your dream home as a 6-bedroom mansion, we all have to start somewhere!

This first-time home buyer section will take you through the important steps and considerations for your first home, including:

  • Determining whether you are ready for home ownership
  • Costs of home ownership
  • The process of buying your first home
  • Securing your down payment
  • Mortgage pre-qualification and pre-approval
  • Financial Approval
  • Closing day

Let’s get started.

Published by DLC.