Being first time home buyers is an exciting time. Owning your own home is a dream-come-true for most of us, as home ownership comes with many benefits. However we need to keep in mind that buying your first home is a major financial investment.
Making an emotional decision
It’s easy to fall in love with that gorgeous kitchen. ‘Staged’ homes are great for getting first time buyers (or even some seasoned home shoppers) to fall in love and let the heart take over. On the other end of the scale, walking into a messy home will turn a lot of first time home buyers off.
Remember to buy with your head, not with your heart. Step back and take a good hard look at the home: better yet, book a second look. Never, NEVER buy a house during an ‘Open House‘, just because the seller or their agent said that you have to act fast.
This is a major financial decision, rule it with your head….not with your emotions!
Overspending
It’s easy to get caught up in the excitement of being first time home buyers. Your bank just told you that you’re ‘pre-approved’ for $350K because you have a great credit rating.
Step back and take a look beyond the mortgage payments. There are a lot of other costs involved in owning a home. Create a budget and stay within that.
Most first time home buyers are also in a new relationship. Fighting about money is not a great way to go. Home ownership should be fun, not a financial burden.
Buying ‘Too Little House’
The opposite of ‘overspending’ is nearly as bad! Buying a home that you will outgrow in a year or two may be a mistake. Determine that the house (or condo) has enough space (and bedrooms) for your current family and any planned increases over the next couple of years.
Unless you are living in a super-hot real estate market, selling your home within a year or two may cause you to lose money. You have to figure on real estate fees, legal costs, taxes, moving costs and more.
Also, re-selling a home very shortly after purchasing it will send the wrong signals to potential buyers: “Why are they moving already? Is there something wrong with the house or the neighbourhood?”
Not investigating the neighbourhood
Yes, the house and it’s immediate neighbours look great, but what about a couple of streets over? Especially if you are a newcomer to the city, or at least new to the neighbourhood, you’ll want to seek the advice of your own agent.
For example, living close to a school is a great asset, but living right across from the main entrance? Having a skating rink close-by might seem like a great idea, until you realize that the rink-hall is also used for ‘socials’ on Friday nights. Picking up beer bottles off your lawn every Saturday morning gets old pretty fast….and the 10-cents refund isn’t worth it.
Buying furniture on lay-away plans
Scenario: you get pre-approved, find and buy your first home, and wait for the possession date to arrive. Great time to buy furniture, right? Not so fast: If you buy furniture, (or appliances, a car or pretty much anything) on any type of credit plan, it will negatively impact your credit rating, and the interest rate you will get. So what?
Nearly every lending institution will perform another credit check on you just prior to possession, and if your credit rating has declined, they can (and have done so) refuse to give you the mortgage.
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Unless you can pay for the items with cash, don’t tamper with your credit rating until you’ve secured the mortgage and are IN the home. Note that I said “Nearly” every lending institution does this? There is one major bank that does not do a 2nd credit check prior to possession. Once they have approved you, and approved the mortgage, you are good to go. Which bank is it? You might be surprised: Contact me to find out.
Looking for the ‘Perfect Place’
The ‘perfect’ home may never present itself. Finding and buying a home in the entry-level price ranges is most often an exercise in compromise. Make a list of ‘must haves’ that can not be compromised, such as the number of bedrooms, area of the city and other criteria.
Then add your ‘nice to have’ items, such as central air conditioning, hardwood floors, double garage. Don’t give up a near-perfect home for features that can be easily added later on. Remember this is your first home, your entry into the club of home-owners and your first foray into the real estate market.
Focus on things such as resellability, good neighbourhood and solid bones of the home. Lean on your real estate agent for advice in these areas. Which brings us to our first and potentially costliest mistake made by (not only) first time home buyers:
Not getting advice from the right professionals
As first time home buyers (or even repeat buyers) you are about to make a major investment. It’s really similar to buying stocks or other investments. After all, real estate agents are governed by the Securities Exchange Commission.
Add to this the fact that in the vast majority of cases, the services of an agent are free, it makes no sense to go it alone.
A good, trustworthy agent will spend time to point out the negatives about a house. Sort of play ‘devils advocate’ for you. And he will take the time to explain the entire home buying process, including the closing costs and all aspects of home and condo buying.
A great resource is the article titled “Buying a house or condo in Winnipeg: 6 Important Steps”
F.A.Q. by First Time Home Buyers
Should first time home buyers have their own agent?
Yes, absolutely. Not just first timers, but especially first time buyers. The seller has their own agent, so should you. When making a huge decision like buying a house or condo, it’s advisable to have a professional real estate agent in your corner.
What are ‘Closing Costs’ when buying a home?
Closing costs will affect every home buyer, not just first time buyers. These are the incidental costs involved in purchasing a home, in addition to the actual cost of the home itself. Closing costs include property taxes, land titles taxes, home insurance costs, legal and mortgage fees and other incidentals. For a fuller explanation, see our article on Home Closing Costs.
Should first time buyers go see their bank first, or chose a real estate agent?
Your real estate agent will be involved in EVERY step of your home buying journey. This is why, buyers should make sure they are comfortable working with their agent. So pick your agent first. Odds are that he/she will have several mortgage lenders to recommend to you, depending on your personal and financial situation.
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It’s really hard to decide what you really want for your home. It’s great that my builder helps me in choosing the best options for my home. Check it here https://ballymorehomes.com/communities/wedgewood/
Thanks! This helped me out a lot. I’m thinking of buying my own place since my home is quite far from where I work and I can’t afford to lose a lot when it comes to expenses.
Typically, first-time homeowners are not able to put 20 percent down on a home, and are – therefore – more likely to pay PMI. However, not enough people know to contact their lender once 20 percent of the home has been paid off. At that time, the PMI will be discontinued. Your lender will automatically cancel your PMI when you owe 78 percent, but you don’t want to pay a month more of PMI than you have to.
Wow….excellent point. Thank you for this info….never realized that…
I almost made several of these mistakes! I had seen this gorgeous house on Prelist.org, but my sister convinced me to do some more research on the neighbourhood – I found out it would be a sub-optimal place to send my kids. I reviewed the rest with my Realtor.