5 Mistakes First Time Home Buyers Make
The first time home buyer (FTHB) down payment assistance announced by the government will likely result in a number of FTHB’s flooding the condo market. So with that being said, here’s our top 5 list of mistakes that first time home buyers (or actually… a number of buyers excluding point 4) make that can certainly be avoided with proper planning prior to your home search. Get ready, set, go!
- Not getting pre-approved for financing before you begin your search.
Yes, an online financial calculator can be a great way to get a ball park idea of how much you can afford, but you won’t know 100% how much you can actually afford until you talk to a lender. There’s so many things to consider – like strata maintenance fees, income, how many years you’ve had that income for, whether you’re a salary, hourly, or contract workers, your credit score, and the list goes on and on. Getting pre-approved for a mortgage involves a mortgage broker or the bank taking all of the necessary steps to qualify you, commit you to an interest rate (you’ll usually be locked in to that rate for 90-120 days), and collect your documents so you’re ready to go when you have an accepted offer. With rates going up significantly, and expected to rise even more, this is a pretty important step to save you a lot of bucks. If you spend all your time shopping only to find out you’ve been looking in the wrong price range and can afford $50,000 less than you’ve expected, you’ve just wasted your time. Knowledge is power, and that’s exactly what a pre-approval gives you.
- Not using a buyer’s agent.
I cannot say it enough times – USE A BUYER’S AGENT! First of all, it’s free. Secondly, this is probably the biggest transaction of your life – you’re probably going to want the help of an expert. Real estate is complicated, the contracts are complicated, the subject removal process is complicated. I once heard of a lady that didn’t use a buyer’s agent, assumed that the stove/fridge/microwave/washer/dryer/window drapes/blinds, etc. were all included and didn’t realize she needed to put it in the contract. She ended up having to buy everything new and lost thousands of dollars because the homeowner and his REALTOR took advantage of her not having any real estate contract experience. So… if you’re thinking of going rogue or using the listing agent as your realtor to “save a couple bucks” think again. Again, buyer’s agents are a free service – you don’t need to pay us anything. Also, the listing agent is under contract to work 100% in the best interests of the sellers. If you work with the listing agent, you’ll be forced in to “no agency” or a “dual agency” agreement, in which your best interests will be compromised. If you’re looking to learn more about this, read our article on why a buyer’s agent is important.
- Not saving big enough for a rainy day
The less down payment you have, the higher your monthly mortgage payment is going to be. Buying a house or condo in Greater Vancouver is expensive, and home ownership comes with a number of unforeseen expenses. The more money you have saved up for a rainy day – like when your laundry machine breaks down or you need a new hot water tank – the better. Don’t forget, you also have property taxes due once a year, and if you’re in a strata building you have monthly maintenance fees due at the first of every month. With great power comes great responsibility.
- Not taking advantage of government programs for first time home buyers
There are SO many government programs that are offered to first time home buyers that are up for grabs. From property transfer tax exemptions to new home GST rebates and down payment loan matching programs, don’t miss out on educating yourself of the opportunities you have to save money. Talk to your realtor or mortgage broker/bank to see how you can save money and receive from from the government when purchasing your first home.
- Not having your deposit ready to go
This one is a heart breaker, and I always try to prep my clients (hoping they’ll listen to me) to have their deposit ready to go. Here’s how it goes: so you’ve fallen in love with a property, made an offer and it’s been accepted. The contract itself states that the deposit is due within 24 hours of acceptance unless otherwise stated. If your money is in an RRSP, investments, or possibly even a TFSA, you may not be able to access it that quickly or be forced to sell any investments at a loss if it’s been a bad week. Believe it or not, I’ve had situations where it took 30 days to take money out of. Always make sure that your deposit is in your bank account as liquid funds (cash) so that you don’t miss out on your dream home.
We know that buying your first home can be tough, and certainly scary. We’re here to help make the process (a lot) easier, and guide you in the right direction. Our buyer services are TOTALLY FREE, and between our prepping materials and negotiation skills we will most definitely save you money and certainly a ton of headaches. Thinking about jumping in to the market? Call us today at 604-765-0376 and we can set up a meeting over coffee (or beer… or wine… :p) and talk about what you can do to get a head start on the process.
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