Housing affordability continues to remain stable across Canada, creating the perfect environment for savvy home hunters. With more houses available on the market, buyers are becoming much more competitive, rushing to complete their purchase agreements. Situations like this often lead to costly buyer errors, as anxious home hunters make hasty, uninformed choices. These mistakes are sometimes impossible to reverse, so be careful.
Mistake #1 – Not Knowing Your Budget
Barbara Sukkau, president of the Ontario Real Estate Association in St. Catherines, warns homeowners that mistakes made during the buying process can have long term effects and may even restrict lifestyle choices. As such, it is important that home hunters review all of the costs involved in the purchase process in order to prepare a realistic budget. In addition to the cost of the home itself, buyers should also factor in closing costs, the land transfer tax, moving costs, and unforeseen extras.
If you need help with these calculations, talk to your realtor. Realtors use a calculation called the “Gross Debt Service Ratio” in order to calculate affordability. Simply add up your before tax monthly income and multiply it by 32%. The total will be your estimated monthly housing payment, including your mortgage, condo fees, insurance, and property taxes. You should also consider your down payment amount, interest rate and the length of your mortgage when budgetting for a home.
Mistake #2 – Not Preparing Your Finances
Many sellers now require a potential buyer to be pre-approved before they will enter into negotiations. This is especially true during a competitive buyer’s market. According to the Canada Mortgage and Housing Corporation, a mortgage pre-approval is time sensitive and is not a guarantee of receiving a mortgage loan. Pre-approval will bring you one step closer to qualifying for a loan as it shows that you meet the lender’s requirements. As such, home hunters are encouraged to apply for a mortgage pre-approval prior to beginning their home search.
Mistake #3 – Altering Your Financial Footings Before Closing
This is a common mistake among first-time home buyers. Instead of waiting for the home to fully close, first-time home buyers will jump the gun and begin purchasing furniture, electronics, and appliances in preparation for the move. Purchasing these items on credit will alter your credit ratios, potentially jeopardizing your financing arrangements. What’s more, if your loan contingency has expired or been removed, you could lose your earnest money deposit along with your new home.
Mistake #4 – Buying a Foreclosure or Handyman’s Dream
There are many bargains to be had in today’s market, but before you submit an offer on a lemon, stop and think. Buying a home that needs work can be stressful, and even though it seems like a great investment now, the upgrades can turn into an expensive nightmare. Before you buy a fixer-upper, make sure you get estimates on any necessary repairs and renovations. Will these updates help improve the value of the property? Or are you simply wasting money? Being aware of potential pitfalls before you purchase is important, especially when dealing with an “as is” sale.
Mistake #5 – Love at First Sight
Failure to shop around when buying a house could cause you to miss out on a good deal or worse, cause you to regret your purchase. While it isn’t necessary to visit every house on the market, it is important that you take some time to compare similar houses in similar neighbourhoods. This will help ensure that you’re getting the right house for the right price.
Mistake #6 – Not Reading the Small Print
Purchasing a house involves paperwork, and lots of it. From the offer to purchase to the legal documents and final contract, there are a number of documents that you simply cannot ignore. Fortunately, you can often request copies of these packets in advance so that you have time to review them carefully. Never assume that contracts are written in your favour – take the time to read the small print in order to avoid any unexpected changes come closing.
Don’t let the rush to buy cause you to make a purchasing mistake. Contact a professional realtor and mortgage broker today for more professional guidance and advice.