1. Underestimating Costs

Using a mortgage calculator is an important first step in deciding whether or not you can afford to buy a home. However, there are many hidden costs to home ownership that mortgage calculators and first-time buyers don’t take into account.

Remember to budget for property taxes and home insurance. You’ll also have to pay city utility bills on top of your monthly phone and cable costs.

If you’re looking into buying a condo or townhome, there will also be fees for common expenses such as maintaining amenities, building insurance and repairs.

The process of buying a home can also be expensive. Be sure to budget for home inspections, lawyer’s fees and closing fees. Closing fees alone are generally 1.5% – 4% of the final selling price.

2. Assuming They’ll Never Get Laid Off

When you’ve got a great job, it can be easy to be lulled into a false sense of security, thinking those monthly paycheques will always be there. But circumstances can change quickly.

When you own a home, you are on the hook for your mortgage payments, even if your employment changes. Skipping payments, or making them consistently late can affect your credit score.

Before you buy, make sure you have an emergency fund with enough money to cover your expenses for at least 3-6 months. Also look into mortgage insurance that can cover you and your loved ones in case your health status changes.

3. Skipping Due Diligence

Competition for homes can cause many first-time buyers to close on an offer without taking the proper steps to ensure a property is in good condition. Don’t let yourself fall into this trap.

Make sure you have the home inspected before you buy it. It can be easy to make a property look good for an open house with cosmetic changes. The inspection will give you invaluable information on the home’s condition. Without it, you could be facing unanticipated costs for repairs.

Before you sign the papers to close the sale, ask your realtor for a walkthrough. This process lets you examine the home one last time before you take full possession. If anything has been damaged, repair costs can be deducted from the final sale price.

4. Taking Pre-Approval For Granted

Mortgage pre-approvals tell you the maximum amount of money a bank will loan to you. It doesn’t guarantee that you will get a mortgage when you make an offer.

Many first-time buyers are surprised when their mortgage applications are denied after being pre-approved. This can happen for a number of reasons.

The condition and age of the home can impact the financial institution’s decision. Each lender has different criteria. For example, if the property’s wiring or pipes are not up to modern standards, your application can be denied. This is something to be especially aware of if you’re considering an older home.

Any changes in employment can also cause problems, even after a pre-approval. If possible, wait to quit or change your job until after the sale has closed.

Taking on any new debts can also be a red flag to financial institutions. If you need a new car, it’s best to wait until your home purchase has gone through.

5. Making Mortgage Decisions Alone

Yes, you can walk into a bank and apply for a mortgage, but you may not get the best rates, or the type of mortgage that best suits your needs. Mortgages are complicated, and it’s always best to get professional advice when shopping for one.

A qualified mortgage broker can guide you through the process and help save you money. If you’re a first-time home buyer with questions about purchasing a home or applying for a mortgage, contact us today. We’d love to help!