Buying a home for the first-time is an exciting time. You’re making quite possibly the most significant financial transaction of your lifetime.
You’re also making the exciting jump from renter to homeowner.
While buying a home is something to celebrate, it’s important to do your homework. As a property virgin, this experience is entirely new to you. The last thing you’d want to do is make a mistake that will cost you dearly.
Here are five of the biggest mistakes first-time homebuyers are prone to make and how to avoid them.
Mistake #1: Buying Too Much Home
Before house hunting, it’s a good idea to get pre-approved for a mortgage. When you’re pre-approved, you’ll know exactly how much you can afford to spend on a home.
Your mortgage broker is going to tell you the maximum amount you can spend, but keep in mind, that doesn’t mean that you should spend the entire amount.
Take some time to crunch the numbers and see if you can afford the mortgage payments on a monthly basis. Don’t forget to take into account property taxes and strata (condo) fees.
You’ll want to leave yourself some financial breathing room in case mortgage rates go up or you run into a financial emergency.
By overspending on a home, you could find yourself “house rich, cash poor,” with very little money to save, let alone to spend on having fun (say goodbye to dining out at restaurants and going on vacation every year). Don’t make this mistake.
By buying a home within your home-buying limit, you’ll be better prepared the next time life throws a financial curveball at you.
Mistake #2: Forgetting to Budget for Closing Costs
If you’ve never bought a home before, it’s easy to overlook closing costs.
They’re just a drop in the bucket, right? Wrong. Closing costs can add up to four percent of your home’s purchase price.
On a $600K home, you could be spending upwards of $24K in closing costs.
And your lender won’t cover these costs, so it’s your responsibility to put this money aside in addition to your down payment.
Examples of typical closing costs include land transfer taxes, real estate lawyer fees and home inspection fees. First-time homebuyers do get some breaks on closing costs, but they’ll still cost you a pretty penny.
Mistake #3: Buying Based Solely on Looks
