6 common mistakes every homebuyer should be aware of

People often say it’s good to learn from your mistakes. But, when it comes to buying a home, you don’t want to leave any room for error. Whether you’re a seasoned homeowner or a first-time buyer, there are many common missteps that can occur throughout the mortgage and buying process, which could end up costing you thousands of dollars. To ensure you’re prepared to take the plunge, here are six common mistakes to avoid when buying a home.

Not getting pre-approved for a mortgage

Getting pre-approved for a mortgage isn’t exactly mandatory, but it offers many advantages for homebuyers. It establishes how much you can borrow early on in the process. Understanding your home affordability not only makes for a more efficient home search, but it allows you to set a realistic budget so you’re not overspending.

A pre-approval will also benefit you in the case of a bidding war – something very common in today’s hot market. When a buyer is pre-approved for a mortgage, a seller is often more likely to accept their offer because it shows credibility and that they are serious about making the purchase. And, if you’ve already been pre-approved, it’s also a good idea to consider these common errors so you can ensure final approval upon your home purchase.

Failing to consider other costs

Coming up with a down payment is only one piece of the puzzle, and while it’s very important, many buyers lose sight of other expenses that come with buying a home. These often include closing costs, insurance fees, property taxes, legal fees, monthly living expenses, moving costs and the list continues. If you plan to purchase in a highrise building or a lowrise property, it’s worth noting that maintenance fees and other costs will differ – making it even more important to understand the difference and evaluate your budget accordingly.

Failing to factor in these costs or allocating too much of your monthly income toward mortgage payments might make it difficult to meet other household expenses after moving in. To avoid this mistake, review your savings and consider all of these expenses before beginning the process. Getting pre-approved is a good first step because it allows you to create a budget to factor in these unforeseen costs.

Limiting yourself to one lender

One of the most common mistakes many homebuyers make is not shopping around for different lenders. Mortgage terms and products vary between lenders, which is why shopping around gives buyers the benefit of comparing options so that they can make the best choice. In some cases, many homebuyers think that getting a mortgage can only be done with the big banks. However, there are many mortgage lenders in Canada, such as credit unions and monoline lenders that may have better mortgage options than the banks. So, before heading to your local bank, it’s recommended to shop around to see what’s available in the market.

At Homewise, our team helps both first-time and seasoned buyers navigate the market to find a mortgage that best suits their unique needs by shopping around with multiple lenders so that they can feel confident and prepared when buying a home.

Having too much debt

Before buying a home, prospective buyers should take a close look at their credit to understand if it’s something they can afford right now. Many start this process too quickly without paying attention to their credit score and debt levels, leaving them in a difficult financial situation later on. Having strong credit, specifically your debt-to-income ratio and credit score, is a key factor lenders consider when approving you for a mortgage. So, before your mortgage closes, you may want to avoid getting a new credit card or taking out any large loans. Taking on new debt while your mortgage application is pending can impact your ability to get approved. If your credit score falls and your debt-to-income is poorly impacted, lenders can go as far as changing the terms of your mortgage or denying it entirely.

Not taking advantage of the first-time homebuyer incentives

The Canadian government has many great programs to help first-time buyers in the homebuying process. However, our team at Homewise has noticed that many first-time buyers aren’t fully aware of these programs and incentives – causing them to lose out on money saved and other useful benefits. Each of these resources help to increase home affordability and alleviate some of the roadblocks new buyers face when buying a home.

Failing to read the fine print

In any transaction, it’s always important to pay attention to the fine print and clearly understand the terms and conditions involved with your mortgage, especially before signing anything. If you’re not familiar with mortgage jargon, you can always consult with an experienced mortgage advisor. We’ll break down all of the complex details so that you can clearly understand what your mortgage entails and the types of privileges and penalties you’re being presented with.

Believe it or not, doing this can save you thousands of dollars if you were to ever switch your mortgage, break it early or make a lump sum prepayment. For example, let’s say you’ve recently received a monetary gift of $10,000 from your parents and would like to use that extra money to pay off your mortgage faster. This would require you to make a prepayment, which is possible but might result in a penalty fee if you don’t have prepayment privileges in your contract. This is why it’s important to clearly understand the terms and conditions before you lock in your mortgage.

Buying a home is an exciting milestone that marks a new chapter in your life. At the same time, it’s essential to stay on top of all the important details, steps and expenses that come with purchasing and owning a home. Whether you’re a first-time buyer or an existing homeowner, this milestone investment is definitely worth doing the right way.