Search for “mistakes made by first time home buyers”.

You will get a shockingly extensive list of common errors and overlooked questions that should have been asked. Embarking on the purchase of your first home is undeniably an exciting new chapter in your life, but FIRST is the key word. You have little-to-no previous experience in the real estate market and the decisions you make can affect your well being financially and emotionally.

The most impactful mistakes relate to mortgage approval and the real costs of buying a home.

Buyers too often are not approved for a mortgage prior to the start of a home search. A verbal pre-approval or online mortgage tool is insufficient. Only a firm commitment from your lender allows you to proceed with confidence. You will know exactly what you can spend. You can go forward with an offer in a competitive market. Sellers are more inclined to accept a bid knowing financing won’t fall through. Lenders will want to check your employment, credit history, available down payment and debt ratio. This can take some time to complete. Although it’s fun to dream big .. this exercise will also serve as a reality check.

Most are aware there are closing costs associated with the purchase, but too regularly, these numbers get shoved aside in the excitement of the buying process. The legal and tax costs are really only the beginning. When the Agreement of Purchase and Sale is accepted, the deposit is due generally within 24 hours. On closing, you will be paying the balance of the purchase price, legal fees, land transfer and property taxes, and utility adjustments.

There are many other practical and financial considerations.

My Top 10 picks of additional pitfalls awaiting home buyers.

 1. Spending time looking at homes you can’t afford.

I must emphasize that searching within your budget is absolutely paramount. Don’t be tempted to wander from your search parameters – you will be embarking on a futile exercise. Finding a home you absolutely love but absolutely can not afford only leads to crushing disappointment.

2. Wants vs needs.

House hunting, whether by booked appointment or through an open house, provides the education as to what your budget will buy. Take stock of the properties providing the extras you want, but don’t let the stunning stone fireplace in a two bedroom listing take you away from your absolute requirement for three bedrooms.

3. Eliminate or reduce distractions.

Buying a house is serious business demanding your full attention. There’s a relatively short window to form an opinion and decide if you can picture yourself living here .. so turn off the phone. See past the professional staging or the clutter and scuffed up walls, and really look for the positive features and any potential problem areas.

4. Neglecting to research the neighbourhood.

The home you buy extends far beyond its four walls – it’s also about the neighbourhood. Conduct your search only in neighbourhoods you can afford, but in turn, do your due diligence and thoroughly research these communities. Are schools highly ranked? Will there be sport facilities and activities available for the kids? Do the everyday necessities require you to drive there by car or can you walk? Visit the area during different times of the day to see how it affects your commute and daily routine. Search for the tell tale signs (toys in the drive or calm and quiet streets) that the community will match your lifestyle. If you plan to submit an offer, introduce yourself to the neighbours. Not only will you get the opportunity to meet them beforehand, but neighbours always know things about the property you’re considering.

5. It’s not all about you.

You will want to see as many homes as possible, and that’s normal, but don’t overschedule. It quickly becomes difficult to recall what you did or didn’t like about any particular house after seeing six in a row. Take notes, but better still, refine your requirements in advance and only visit listings that check most of the boxes on your list. Please remember .. it’s not all about you .. be respectful of the seller’s home, and don’t expect to get a showing with half an hour’s notice. If you are attending an open house keep your comments private. The listing agent works for the seller and is obligated to relay anything they may overhear. This is extremely important if you’re considering making an offer – as information previously reported to the seller can put the buyer at a disadvantage.

6. Making the actual offer.

Be knowledgeable about the current state of the real estate landscape. Is it a sellers’ or buyers’ market? Negotiations and strategies must change for different scenarios. In a competitive market, sellers’ may find anywhere from three to as many as twenty or more offers on the table. Rarely is there a second chance, so it’s vital to go with your very best offer from the start. In a buyers market, seller’s may be more willing to accede to buyer conditions and requests for repairs. A balanced market will likely result in a little back and forth negotiation before arriving at the final sale price. Recognize the circumstances and proceed accordingly.

7. Always understand what you’re signing.

You will be asked to sign or initial single and multiple-page documents. All are legal and binding contracts. This is not the time to be shy. Ask questions. Get clarification. Whether signing in person or through electronic means, an experienced REALTOR® should, and will, explain each and every paragraph of the paperwork you are signing. This, after all, is the really important part of house buying.

8. Deciding not to elicit the help of qualified professionals.

Buying your first house is not the time to go it alone. Mortgage professionals will explain amortization, interest rates (fixed or variable) and the different mortgage (conventional or high-ratio) products available to you. Speak with various insurance companies or a broker. Premiums and coverage can be quite wide ranging and you will need insurance to get a mortgage. Ask for lawyer recommendations. Enlist the help of a real estate agent acting in the capacity of a buyer’s representative. It just makes good sense to work with dedicated professionals when making such a big investment decision.

9. Factoring in all of the costs.

The expenses involved in the purchase of a house go beyond the basic mortgage, legal and taxation costs. Each trade in real estate is unique, but there are expenses that can generally be expected. Your mortgage lender may require a property appraisal and/or a survey. A home inspection is essential. Title insurance and if your down payment is less than 20% of the purchase price, a CMHC insurance premium. Then there are the expenses specific to your family: moving costs, utility connections, repair, renovation and decorating purchases.

10. Not taking advantage of government programs.

Federal and Provincial Government programs can help to make your dream of homeownership a reality. These incentives can be fluid and it’s important to check the latest qualifying requirements.

Ontario provides for a Land Transfer Refund up to a maximum of $4,000.  https://www.fin.gov.on.ca/en/bulletins/ltt/1_2008.html

The Federal First Time Home Buyer Tax Credit (HBTB) helps to offset the costs of legal and adjustment expenses. The Home Buyer Plan for First Time Home Buyers (HBP) allows you to withdraw money from an RRSP, tax free, for a qualifying home. There are of course conditions, and the cash must be put back within 15 years.  https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan.html

CMHC, the Canada Mortgage and Housing Corporation helps by offering mortgage loan insurance for buyers with as little as a 5% down payment.  https://www.cmhc-schl.gc.ca/en/nhs/first-time-home-buyer-incentive

The emotional pitfalls that often await the first time buyer.

Looking for your first home is exhilarating! It’s easy to be dazzled by great staging or a perfectly renovated kitchen. You will be searching MLS® listings and visiting every possible open house. It’s easy to walk through the finished homes, but you barely get past the foyer in the one that doesn’t meet your move in ready expectations. Maybe take a moment to re-think your dismissal of this property.

Does the perfect home actually fit into your budget or does it stretch your approval to its limit? Will you still be able to afford the closing costs, the actual moving, and the buying of new furniture? Will your first home make you so house poor that you can’t afford a date night?

Take a second look at that not-so-perfect house. If it has good bones and it’s liveable, without the need for immediate major expenditures, it may be a far better first home investment. Given that it’s not perfect, to compete in the marketplace, the property should be listed at a price reflecting the need for updates and improvements. The equity gained and the money saved on the purchase of a home in poorer condition will likely be greater than the money you spend to make it ideal for your family, especially if you can make improvements yourself. Don’t dismiss a home out of hand just because you don’t want carpeting – an affordable and easily accomplished renovation. Trust in your REALTOR® when they tell you if a property is a good investment, or perhaps better left for a professional contractor.

Current prices can make it difficult for first time buyers to achieve home ownership on their own. Saving for a down payment and qualifying under the mortgage stress test can be challenging. It has become normal and often necessary to rely on financial help from family members. Potentially, another emotional pitfall.

It’s common to see entire families, in two or three cars, arriving at an open house. Here’s the problem – everyone will have their own opinion. A helping hand is wonderful, and young buyers do and should rely on the counsel of parents or grandparents, but the advice given may not always be good or factual.

[A newly married couple searching for a home finds a lovely detached house in a preferred neighbourhood, in a good school district and close to amenities. The house is listed at fair market value and within budget. The parents, who purchased their home decades ago, make an off hand remark that the house is “overpriced.” A comment not backed up by statistics or comparisons. The young couple, working under this advice make a low offer that will only be rejected, or worse, they decide to walk away without making a reasonable and perhaps successful offer.]

Take family suggestions into consideration, as naturally, they have your best interest at heart; but remember, your REALTOR® is the professional in the room with up-to-date information and market knowledge.

Your first home is likely not your last home. As the family needs change, so does the family’s housing requirements. Yet, even with this awareness, many first time home buyers find it difficult to keep their expectations in check and make unnecessary mistakes.

You will never buy your first home ever again.

There is truly no other real estate transaction that will compare to buying your first house. The place you will make your very own. The one where you will perhaps raise a family. It’s where you decided to invest your money. It may be a stepping stone to other property, or it may be where you choose to remain.

Adhere to common sense, find your home, and appreciate every second of this once in a lifetime experience.