10 Common First-Time Homebuyer Mistakes to Avoid

Are you thinking of purchasing your first property? As a first-time home buyer, the process can be especially exciting. However, there can also be significant stress involved! Getting pre-approved for a mortgage, finding the right Realtor, and spending the time looking for a property that fits your budget and lifestyle can seem like a daunting task. All the while, making emotional decisions or skipping important steps can lead to expensive mistakes that may result in significant setbacks to your homebuying goals.

So, to ensure your transaction is as successful as possible, it’s important to be wary of common first time home buyer mistakes; avoid these and you’ll be well on your way towards successfully finding the home that was meant for you!

#1 – Not knowing your budget or financial goals

One of the most common mistakes made by first-time homebuyers is they don’t fully understand how much money they need to buy a property, including hidden costs and unexpected expenses that can arise during any real estate transaction.

Expenses associated with buying real estate include one-time fees and recurring monthly, quarterly, and annual fees, which can range from a few hundred to several thousand dollars. There are also many start-up costs, such as:

• lawyer fees
• land or property inspection fees
• moving costs and closing costs
• condominium document review (if applicable)
• land transfer tax (if applicable)

…and more. This is where a budget is essential in breaking down your funds. Budgeting for all homeownership costs, in addition to the mortgage payment, is vital to avoid financial strain. Many buyers focus only on the mortgage payment, neglecting recurring costs such as utilities and maintenance.

#2 – Looking past other expenses apart from mortgage

Keep in mind that after you find out how much extra cash you have, you won’t want to spend the full amount on a mortgage payment. That’s because there are many other recurring expenses associated with owning a home, such as:

• Property taxes
• Home insurance
• Condo fees (if applicable)
• Home maintenance, repairs and renovations
• Utility costs and hook-up fees

Underestimating standard property maintenance and repair costs can lead to financial strain after purchasing a home. It is recommended that owners generally set aside 1% to 3% of their home’s value each year for maintenance and repairs.

#3 – Not getting mortgage pre-approval

Another common mistake among first-time homebuyers is not obtaining mortgage pre-approval. Financial institutions play a key role in determining your borrowing power; therefore, getting pre-approved by a reputable lender can help you understand exactly what you can afford.

Sometimes there will be discrepancies between what you think you can afford and what a lender will approve. This could be because of bad credit rating or a high debt load to income ratio. Inconsistent income flow is another. Your credit score is a major factor that mortgage lenders use to decide if you qualify for a loan and what interest rates and terms you’ll receive.

There’s also the possibility of an error on your credit report. This happens more often than people think, which is why you should sign up with a Canadian credit bureau to check for and fix any errors well in advance of buying your first home.

Getting pre-approved for a mortgage shows sellers that you’re a serious buyer. Not having pre-approval can make sellers less likely to take your offer seriously in a competitive market. The last thing anyone wants is to make the mistake of not having the mortgage they need to buy the home they want.

#4 – Getting only one rate quote

Shopping for a mortgage is a lot like shopping for a car; it pays to do your due diligence and see what different dealerships have to offer.

First-time homebuyers often overlook the importance of shopping around for mortgage rates, which can lead to increased costs over time. Comparing interest rates from different mortgage brokers is crucial, as even a slight rate difference can significantly impact your total repayment amount over the life of your loan.

Mortgage rates vary between lenders, as do the closing costs and other associated fees. For example, one lender may offer to cover some closing costs to secure the deal, while others may provide cash back. Some may offer zilch, nada. If all three offer the same rate, there’s a clear benefit to choosing either the first or second lender.

Submit a pre-approval application with multiple lenders to see what they can offer. Taking the time to compare your options could save you several thousand dollars over the life of your mortgage, so don’t skip this step!

#5 – Starting without professional representation

The importance of hiring an experienced real estate agent and Realtor to be your buyer’s agent who will represent you and have your best interests at heart cannot be overstated.

Make sure to find an agent who works in the industry full-time for a living. They will have more knowledge, more experience, and should give you better adviceto help you avoid making common mistakes made by many first-time home buyers.

You should know that you don’t pay for your buyer agent’s services. Unless there’s a specific contractual agreement between you and your Realtor stating otherwise, buyer representatives typically earn commission on the sale of property, which is paid out by the homeowner – not the buyer.

Therefore, why wouldn’t you find a Realtor to represent you and help guide you through the first-time home-buying process? Failing to acquire professional services from a qualified, reputable agent could very well lead to significant stress and headaches.

#6 – Not using tax credits or government programs

First-time homebuyers should take advantage of government programs that make homeownership more accessible. Failure to do so is a major mistake that will cost your bottom line, money which could have helped pay for your moving costs or utility hookup charges.

Home Buyer’s Plan: One of these programs is the Home Buyers’ Plan, which allows you to withdraw up to $35,000 from your Registered Retirement Savings Plan (RRSP) to put toward your down payment—an excellent way to leverage your retirement savings in the transaction.

First Home Savings Account (FHSA): Canadians also have access to the First Home Savings Account (FHSA), which lets you put $8,000 per year towards your first property and becomes non-taxable income. When combined with mortgage pre-approval, using these assistance programs will help you understand your financial limits and make you a more serious buyer.

By setting clear priorities, doing your research, and seeking expert advice, you can streamline your house hunting journey and move one step closer to finding that perfect property.

#7 – Not viewing all your options

There’s always a ton of options as a first-time buyer, so do your due diligence and make sure to view all that’s out there on the local MLS residential market! It’s essential that, as a first-time buyer, you don’t get swept off your feet after viewing one spectacular home, because there might be another that is just as amazing and/or offers better functionality for your lifestyle in a better location, all for the same or a lower price!

Also, make sure to do your due diligence when choosing a community, as doing so, in some instances, is more important than choosing the right home. Make sure to research school ratings, commute times, and other factors when choosing a community. Explore the neighbourhood during the day and at night to get a complete sense of how it feels to live there. Drive through the community to understand traffic flow and any observable community dynamics. Also, if possible, stop by and ask some neighbours how they feel about living in the area.

Viewing as many properties for sale as possible helps first-time buyers determine precisely what is and isn’t necessary in terms of features. Consider how property values in the neighbourhood may change over time and how your location choice can affect your home’s long-term resale value.

#8 – Be reasonable, don’t be too picky

Your first home doesn’t need to have a four-car garage, five bedrooms, and a backyard basketball court. It’s perfectly okay to accept that your first home – unless you’re filthy rich – won’t be a balling mansion with all the bells and whistles of a multi-millionaire’s abode.

Some first-time homebuyers are way too picky, hoping to find a property with every feature they desire. This isn’t very realistic, given that first homes are usually more affordable properties. No home will meet your every single preference or expectation—there is no such thing as the perfect house.

So, make a list of your wants and needs. If you can secure most items on your list for a particular property, you should be delighted. Focus on practicality and must-have features. Consider what’s important in a potential home for you:

• Construction date?
• More bedrooms?
• Fenced backyard?
• View?
• Location?
• Layout?

These are just a few features/specifications that might be more or less important and need to be weighed out against one another. Also, keep in mind that it is easier to improve a home than to change the neighbourhood; you may be able to make renovations later that will help create the home you’ve always wanted.

#9 – Not getting a home inspection

It’s crucial for all homebuyers to hire a professional company to conduct a thorough home inspection! In addition to any pre-listing inspection provided by the seller, you should always conduct your own inspection to ensure nothing is missed.

Sometimes, first-time buyers are more likely to skip condo document review and a home inspection because they aren’t as familiar with the process as an experienced buyer.

Home Inspections: Can uncover issues that may cost thousands to repair, making it a crucial step in the buying process. For example, a leaky roof, foundation cracks, or plumbing problems can be uncovered during inspection—repairs for these issues can easily run into the tens of thousands if not caught early. Skipping a home inspection can lead to unexpected repair costs that may be significantly higher than the inspection fee.

Condo Document Review: Skipping a condo document review (if applicable) can be a costly mistake. This review investigates the health of the condominium corporation and if there have any been any past special assessments or other red flags that might deter you from buying in the development.

Having an experienced real estate agent by your side every step of the way will ensure you never make this mistake. They will have your best interests at heart, be able to recommend third-party professionals to help assist with the buying process, and will undoubtedly recommend that a home inspection or condo document review is a mandatory part of the buyer process.

#10 – Not considering the future

You must consider your plans, even when buying your first home. Do you plan to have a baby soon, live with roommates, entertain guests often, or walk to school or work?

These are important questions to answer, not only to make sure you’re satisfied with your purchase, but also to consider potential resale value. Also, consider the location. Some questions you might want to ask yourself:

Q – Am I planning on staying in this location for more than 5 years? If so, how much space will I need?

Q – What kind of future developments is planned in the area that might affect my resale value and overall comfort in my home?

Q – Are there enough nearby amenities and services for added convenience; am I close enough to walk or willing to drive the distance to get there?

First-Time Buying Negotiation and Offer Strategies

When you’ve found your dream home, having a strong negotiation and offer strategy is key to standing out—especially in a hot residential market. Work closely with your real estate agent to determine the property’s fair market value and craft an offer that reflects your budget and current market conditions. Your agent’s expertise can help you assess the seller’s motivation and the home’s condition, ensuring your offer is competitive without overextending yourself.

As previously mentioned, being pre-approved for a mortgage and having a larger down payment can make your offer more appealing to sellers, giving you an edge over other buyers. Always include a home inspection contingency in your offer to protect yourself from unexpected repairs and costly surprises. This step is crucial for first-time buyers who may not be familiar with potential issues that could turn a dream home into a money pit.

Guard against having buyer’s remorse by taking your time, doing thorough research, and seeking expert advice before making any commitments. By being prepared, flexible, and strategic, you can negotiate effectively and secure the right house for your needs and budget.

Set Yourself Up for Home Buying Success

Buying your first home is a big deal, but with the right knowledge and strategies, you can avoid common mistakes and set yourself up for long-term success. By understanding the home-buying process, developing smart home search strategies, navigating the market with confidence, and employing effective negotiation tactics, you’ll be well-equipped to make sound financial decisions and save money along the way.

Remember to prioritize your financial goals, seek expert advice, and take your time to find the right house that fits your needs and budget. Don’t hesitate to ask questions and lean on the experience of your real estate agent and other professionals. With patience, persistence, and a clear plan, you can find your dream home, start building equity, and enjoy the many benefits of homeownership. Stay informed, be prepared, and make every decision count—your future self will thank you!