Once you enter the adulthood phase, one of the most exciting occurrences that you will ever experience is to be buying your own house. However, purchasing one is totally different from renting one for a good number of reasons. We won’t be listing them on this blog since (1) this is not the scope of our topic and (2) you already know instinctively that renting out is worlds apart from owning your own property.
This blog will focus on erroneous assumptions that most – if not many – first-time house buyers commit when deciding to purchase their dream homes.
We will go through them briefly but concisely so that you can have a clear picture of what happens when shortcomings like these happen.
We want you to clear your mind…empty your thoughts…and feel relaxed.
Are you ready? Let’s dive in…
First-Time House Buyer Mistakes
Excitement overwhelms you, the prospective house buyer, each time you come across an advertisement that reads, “3-bedroom house with swimming pool and fantastic mountain views for sale”, right? Of course, it does!
However, you won’t be as overwhelmed with joy once you get to know what it entails to purchase this hot property. In fact, once you find out what first-time home buyers’ mortgage really is, you might just turn down the offer and look somewhere else or, much worse, forego the idea of even thinking of buying your dream property.
We will be outlining the 6 most common misconceptions that many first-time house buyers like you encounter when deciding to acquire a house:
a. Mortgage payments are ALL that matter – when you are graduating from being a “house renter” to “homeowner”, you will have to consider not only the mortgage loan repayments but also other expenses that come along with buying – and maintaining – your own property.
Miscellaneous fees also add up to the accumulating costs that you will soon encounter and settle so you have to do your research on this matter.
You don’t want to end up losing more money than you can afford so make sure that you have funds that will go beyond paying your monthly amortization dues.
b. Pre-empting mortgage approval – buying a house is dissimilar to purchasing a pair of shoes that you can either return or replace. The former involves a lot of paperwork to look forward to and if you become short-sighted and proceed on house hunting without even checking if you can get approved for any type of loan then better kiss your dream house goodbye.
Make sure that every aspect of your credit and cash-on-hand is on check: that is, your credit score is high and you have money in the bank. This way, your lender will not consider you a high-risk borrower which will make your house purchase much easier to accomplish.
c. Having no backup funds – this is one costly mistake that many, if not all, first-time house hunters fail to do beforehand. It is a MUST-HAVE for you to have a backup or emergency fund to cover unexpected expenses when or during purchasing your dream property.
Your lenders will request a copy of your bank statement and if they find out that you are lacking in additional funds then you might be considered a risk to their business. Ending up with a below-average rating either for credit score or cash will affect your property purchase.
Unfortunately, if this is your case then aspiring to qualify for mortgage with bad credit may be your only means left – that is – if lenders are still willing to extend their money to you.
Make sure that you have more than enough money in the bank so that you won’t get hammered in when expenses start accumulating.
d. Taking the first interest rate offer excitedly – you have to consider that your mortgage loan carries interest rates that better suit your financial condition. Do not, by any means, jump on the first interest rate given to you.
Commit to doing the necessary research on different interest rates initially so that you can clearly know where you stand when it comes to paying your monthly amortization. Always target the lowest interest rate since this will determine the length of period you need to repay this amount without prematurely drying out your funds.
e. Skipping home inspection procedure – this by far is the second most important aspect of your house hunting/buying activity. It is without any doubt that you have to have your house inspected; otherwise, you will end up with costly maintenance that will exhaust your money really fast!
Take hold of a reputable house inspector and allow him/her to do his/her job so that a proper estimate of (1) how much additional costs will incur if further renovation or additional repair is required and (2) how much to sell your house depending on the overall condition of the property – inside and outside.
(NOTE: Number 2 condition almost always happens all the time and it will benefit not only you but also the future owner of your property if you attend to this properly.)
f. Being unaware of negative credit report/credit red flags – consider this as your top priority if and when you are deciding to purchase a house. Your negative credit report is your financial conscience: it tells the lender everything there is to know about your person, your finances, and your acumen in budgeting.
This also informs the lender if you can be made eligible for getting a mortgage with bad credit so make every effort to provide a copy of your credit report immediately to avoid delays in your plans.
Failure to provide yourself and your lender with a financial and credit background check is like the two of you test driving a car with graded front and rear windshields and without any car door windows installed. It’s a foreseen disaster in the making and not even worth the risk at all!
Final Thoughts
There is nothing wrong in getting worked up when buying your dream house. You just have to speak with a reputable mortgage advisor to get you started. Moreover, you should do some research into the different interest rates available for first-time house buyers like you so that you won’t end up paying too much.
Likewise, make it a point to have your new property inspected and your credit record checked for negative data reports. These steps will save you a heap of money in the long run and lessen the risk of a financial drought that will render you and your dream property in serious jeopardy.
We are your trusted mortgage solutions experts based in Canada founded by Faizal Garasia in 2019. We have access to more than 90 lenders including the largest banks, credit unions, trust firms, and financial institutions across Canada.
We help you understand and resolve issues regarding mortgages, finances, taxes, and other loan-related payments that impact your real estate plans.
Contact us at (416) 825 0142 or send an email to faizal.garasia@dominionlending.ca today for more information.
