As of May 2019, the average home cost in Northern Ontario was $190,991. Compared to many major cities in Canada, that is a do-able number for most first-time home buyers. So if that’s you, and you’re considering making the biggest financial decision of your life - stay on the right track by avoiding some of these most common first-time homebuyer mistakes.
Mistake #1: Shopping for a dream home before securing your mortgage
While flipping through listings and popping into open houses may be enticing, shopping for your home before getting pre-approved for your mortgage often leads to heartbreak. Be sure to review your financial situation before setting out and secure your mortgage ahead of time, so you can make a smart decision based on what you can afford.
Mistake #2: Making the wrong sized down payment
It’s a common belief that you need at least a 20% down payment to buy a home. If that goal feels impossible, you’re not alone. In reality, many homeowners today don’t (or can’t) put down that much up front, opting for the 5% Canadian minimum. However, occasionally, those owners end up with regrets too. In a recent survey, 11% of millennial homeowners agreed with the statement: “I should have waited until I had a bigger down payment.” (Nerdwallet, March 2019). Try starting with a mortgage calculator like this one, so you can start figuring out just how much house you can afford, the level of savings you’ll need, and the time it’ll take to get there.
Mistake #3: Emptying your savings
While it’s tempting to scrape together as much as possible and make the full 20% down payment, draining your savings to do so isn’t the right way to go. When you pool all your money into a down payment and closing costs, you’re leaving nothing for emergency funds, unexpected renovations, furniture, or an increase in bills such as property tax and insurance. Essentially, you make a significant investment riskier when you don’t have something to fall back on. Check in with a mortgage advisor you trust, for an estimate of all the costs associated with purchasing your first home.
Mistake #4: Changing your financial situation before closing
When you first apply for a mortgage, lenders pull credit reports, check references and track bank accounts to make sure your financial picture looks good - and they’ll do it again just before closing. Changing jobs, skipping credit card payments, or making big purchases can be a big red flag which jeopardizes closing on your dream home. It’s best to hold off until everything has been settled, and the sale is final, before buying all that new furniture with your credit card.
Mistake #5: Underestimating the hidden costs of home ownership
According to a recent survey, 20% of homebuyers in Canada forget to factor in the prices of home insurance and maintenance fees. Homeownership means more utility charges, higher maintenance costs, and property taxes. You’re also looking at mortgage, homeowner, and hazard insurance, as well as hiking interest rates, home inspection and legal fees.
To avoid being one of the many, we recommend talking to a mortgage advisor, like those at YNCU, who will actually sit down and help you crunch the numbers ahead of time. Offering a wide range of locally-approved mortgage options, online booking, and honest, straightforward advice from consult to closing, YCNU advisors will be there to help you find your dream home.
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