When you decide to enter the home buying market, it can be an exciting experience. But even for those who are not first-time homebuyers, easy mistakes can be made that result in you spending more than necessary, missing out on a great opportunity, or not getting what you thought you were buying.
To avoid these minefields, the Ontario Real Estate Association (OREA) has listed five of the most prevalent oversights people make in the home buying process.
Being unclear on how much you can afford
An especially common misstep is not knowing what you can afford. The Canada Mortgage and Housing Corporation's "Are you financially ready?" will take you step-by-step in helping you determine:
- How much you spend now
- How much you can afford
- Your maximum house price
Once you have an idea of how much you can afford, and how much of a mortgage you'll need to get, a mortgage payment calculator can help you get a feel for:
- the approximate payment to be made according to the payment frequency selected,
- roughly how much interest you'll end up paying, and
- when the mortgage loan will be paid off.
Remember, there's more to home buying than just the house price. The OREA reminds house hunters to keep in mind that money will be needed for land transfer taxes, closing costs, home inspections, moving expenses and unexpected incidentals-all which should be factored into your budget.
Not getting pre-approved for a mortgage
"Many sellers will require a potential buyer to get pre-approved," says Patricia Verge, board member of the OREA. "When there are competing bids on the house of your dreams, pre-approval could give you the edge."
Pre-approval means that a lender has reviewed your finances and determined how much of a mortgage they believe you can afford. Although it is not a guarantee of approval for a mortgage, the confirmation by the lender (you'll be given a certificate of sorts) tells the seller that you're likely able to produce the money needed to buy the house.
Not knowing what you want
Know what you're looking for in a home, but keep in mind that what you're looking for in a home often extends beyond its walls. People usually have an idea of how many bedrooms and bathrooms they want, but forget to ask questions like:
- Are schools, grocery stores and banks nearby?
- How easy is it to get to work?
- What size of yard is important?
- What's important in a "neighbourhood"?
OREA recommends that you create a list of needs, wants and must-haves by thinking about a day in your life and what you need out of your home, and its location, in order to live the way you want to.
Relying solely on the seller's home inspector
Getting a home inspection, independent of the seller's inspection (if they have one) is something OREA says people often fail to do. "Ensure that you have a qualified and bonded home inspector perform a full inspection as part of your offer. An investment of a few hundred dollars could save you thousands down the road," says OREA board member Phil Dorner.
According to the CMHC, a home inspector's role is to inform you about the property's condition. The home inspector will tell you if something is not working properly, needs changing, or is unsafe, as well as if repairs are needed, and maybe even where problems may have occurred in the past.
Allowing emotions to get in the way of effective negotiations
Too often when a person feels they've found the 'perfect' house to make their home, these feelings find their way into the decision and negotiation process.
Try to keep your emotions in check and avoid doing something that could hurt your wallet down the road (like not getting your own home inspection) or dragging you into a bidding war that you may not be able to afford.
Buying a home is a big purchase, a long-term purchase and you'll want to ensure that it's a purchase you can live with.
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