First-time homebuyers can make a lot of financial mistakes when shopping for a home. Assuming they’ll get enough financing, signing up for an overly expensive mortgage, not taking other homebuying expenses into consideration: they can all lead to problems, especially in an era of higher interest rates. Here are some common buying mistakes that real estate pros have seen novice homebuyers make.
Not having financial ducks in order. Buyers don’t always get fully pre-approved, which requires more than just a general chat with their lender. It must be a full discussion of debts, possible credit issues and earnings with a mortgage specialist at the bank or with a mortgage broker. That way there shouldn’t be any financial surprises when they find that “right” home, submit an offer and then go back to the lender to firm up financing.
Jim McKeown, Broker of Record/Partner, Coldwell Banker Rhodes & Company
It’s a mistake to go into the new home without a complete, room-by-room game plan of how to accessorize and add furniture. I see this happen especially with young couples. When you are moving from a one- or two-bedroom apartment into something much larger, you won’t have everything you need to fill the home, so you need to plan room by room and stick to your plan. Many people go into consumer debt trying to fill every room with what they see on HGTV shows.
Nick Bachusky, mortgage agent, mortgageinottawa.com
Failing to shop around for rates. The same way you’d go online to compare flight or hotel prices, in order to save money you have to compare how rates from banks, brokers and credit unions stack up against one another in the market. By accessing sites like RateHub to compare the best mortgage rates, the first-time buyer can feel confident they’re starting their home ownership journey with the best product.
Alyssa Furtado, co-founder, ratehub.ca
Pre-approval of your mortgage is an important part of the buying process, but first-time buyers may not be aware of how their compensation structure fits the application process. For example, if you are self-employed you need to have a minimum of two years’ tax returns (T1 Generals) and corresponding Notices of Assessment to present to the lender. If you are a part-time employee, it’s important that your employer will state that your hours are “guaranteed,” and a lender may ask for additional confirmation such as T4s along with the standard salary letter and pay stub.
Frank Napolitano, Mortgage Brokers Ottawa
First-time homebuyers often need to be reminded about the importance of knowing and understanding their credit score before they apply for a mortgage. Their score is a “snapshot in time” that can change if they then decide to lease a car, incur credit card debt or take out a loan before buying their home. The credit score is a dynamic score that reflects financial activities, and a poor score can make it hard to get the best mortgage rates and terms.
Brent Conley, Royal Lepage Team Realty
Originally published April 17, 2017
