The process of buying a house is filled with unknowns and missteps so common any new home buyer seasoned or not could fall prey to them. If you’re entering the real estate market for the first time, then it makes sense to learn from the mistakes others have made before you, so that your quest to find your dream house doesn’t end in disaster. With that said, here are the top 5 mistakes you should do everything in your power to avoid when buying a house.
Not Understanding Your Financial Position
Even if you are a frugal spender, the reality is that no one really knows what condition their finances are in until they speak to the bank. I’ve been stressing the importance of getting a pre-approved mortgage here for a few weeks now, but it bears repeating. One of the greatest benefits of a pre-approved mortgage is that it lets you know exactly which houses you can afford and which are clearly out of reach at this point in time. That’s not to say you should add it to the “never going to happen” list, it just means it’s not in the cards for your first home.
While getting pre-approved will let you know how much funding you can get from the bank, the costs of homeownership don’t stop there. Which is why you should make sure you don’t…
Forget to Consider Additional Expenses
Many first-time homebuyers are blindsided by unexpected fees throughout the process, forcing them to go into costly credit card debt or find a different house entirely. Make sure you factor in all the costs of homeownership, not just the initial price of the house.
There are many closing costs, such as a property valuation, home inspections, interest adjustments, and others that you need to make yourself aware of before you make an offer. For instance, in Ontario, on a house that sells for $300,000, there is a provincial land transfer tax of $2,975 and a municipal tax that is almost as much in some cities. These costs are typically paid upfront and are over and above the price tag on your offer.
Once the deal is finalized, the bills don’t stop either. That lawn isn’t going to maintain itself, and you can’t heat a house on dreams. Seasonal changes can also throw another curveball at you. If you’re buying your house in the summer, make sure you know how much it will cost to keep it running in the winter. Electric heat, for example, is much more costly than a gas furnace, and that central air that you had on your must have list can be crazy expensive to run throughout the entire house when it’s plus 40 out.
However, you can avoid all of these mistakes so long as you don’t…
Neglect to Hire a Realtor®
Most people wouldn’t think of cutting their own hair or representing themselves in court, and yet, a surprising number of us think that we’re perfectly capable of becoming amateur Realtors® at the drop of a hat. Save yourself the headache, and invest in someone with the experience to guide you through the chaotic world of real estate especially, if it is your first house! If you are a first-time home buyer and don’t need to sell a home in order to buy the home you have in mind, there’s no cost to you for working with a Realtor®. The commission that the Realtor is paid, if you do buy a home, is paid for by the seller of the home, not you as the buyer. Another thing to keep in mind when working with a Realtor® as a first-time home buyer is that you shouldn’t choose to have the agent listing the home, represent you when putting an offer in on the home they have listed. This often happens when first-time home buyers explore homes on their own through open houses, and though it might seem easier to work with the Realtor® selling the home directly, that Realtor® won’t necessarily have your best interests in mind as a buyer, due to the fact that they are also trying to get the current homeowner, the best dollar for their home as a selling agent, causing a conflict of interest.
An agent can also help manage your expectations on any given home. Online home prices are notoriously inaccurate, and it is certainly deflating to learn that the house you’ve been pining over for two weeks is $250,000 more than you thought. A real estate agent can help cut through this confusion so that you don’t waste your time during your search and they often have a good idea as to the true value of the home to compare the price to the real worth of the property. You can’t forget that prices are listed at what the market can bare, meaning for what people are willing to pay for them, not what they are necessarily worth.
Not only that, Realtors® will most likely make sure that you don’t…
Decide Against Getting a Home Inspection
If you’re running low on cash, it is tempting to start cutting corners, but don’t skimp on the home inspection. An inspection costs about $500 on average, but it can save you literally thousands of dollars in the long run, as well as weeks of headache – Which is worth every penny as a first-time home buyer. Of all the mistakes on this list, this is the easiest one to avoid, and potentially, the most financially devastating mistake to make.
Despite this, about 10% of houses aren’t inspected. Because the unknown can happen, it’s always a good idea to have a bit of a financial nest egg set aside with enough money on hand before the deal is finalized so that you’re not in a pinch if you do receive an exponentially larger bill down the road.
But by far, the worst mistake you can make when buying a house is…
Making Your Decisions with Your Heart
You walk into that perfect house, with that perfect porch, and you immediately begin imagining your life there. Suddenly, you can’t even think of living anywhere else. Forget the cost! We are buying this house no matter what.
This kind of thinking can be dangerous because instead of looking for potential negatives about a house, you start ignoring them, which is bound to cause problems eventually. No matter how alluring a house is initially, it’s important to keep an open mind and make your final decision based, not just on aesthetics, but on what is financially sound.
By keeping these common mistakes in mind, you can avoid the bank-account-busting consequences that many others have had to endure. The challenges of buying a home are too numerous to list in one article, but with the right kind of preparation, and the right mindset, you will have the tools you need to make a deal that meets your financial goals. In fact, if you are thinking of buying your first house, feel free to call me at 705-315-0516. I can help you navigate the minefield that is the mortgage and real estate market, working alongside you each step of the way. I am always happy to help you gain a better understanding of the challenges of homeownership, and look forward to helping you reach that goal.