Buying a house is a major investment, the biggest one we’ll make in our lifetimes.
For first-time homebuyers in particular, any missteps can be especially costly.
Local Real Estate Broker Kimberly Fairley has seen her fair share and wants to help future buyers get it right. Here are her top 5 mistakes to avoid when buying a home:
1. Not visiting a bank or a lender before you start shopping
Make sure you have a pre-approval before the house-hunting begins. A bank or lender will let you know what a realistic budget would be. You want to make sure that you’re looking within the right price range, that you’re actually qualified to purchase the home you’re interested in and that you’ll be able to put a strong offer in. A verbal agreement isn’t enough. Buyers can spare themselves the pain of falling in love with a house they can’t afford by making sure they talk to someone first.
2. Failing to get advice from the proper professionals
“As Realtors, we’re able to bring you through a home and give you guidance on it, but there are some areas within the home that you should be seeking outside professional expertise on,” says Fairley. If there is a question with the electrical or the plumbing, if you want to know what kind of insulation is in the attic or if the furnace is working, call in the pros. Real estate agents have general knowledge and can certainly point out areas of concern, but you need to go a step further and have a professional come and look for you.
Buyers also need to understand how home inspections work. A good home inspection gives you an idea of what’s going on with a house because it covers a variety of areas. When a wall is finished, for example, you can’t see any potential issues behind it; they’ll likely only be revealed down the road when it’s time to do a renovation. Fairley wants buyers to understand the homebuying process and have the patience to see it through. If you happen to notice something—like a stain on the wall or a small puddle by the furnace—do not be afraid to ask questions. The home inspector will guide you in the right direction.
3. Giving in to pressure
Because there’s such high demand for housing right now, the pressure to find something can be intense. Fairley cautions against letting the pressure get to you. Don’t get rushed into making an offer on a house that’s not right for you. Sometimes buyers have seen quite a few houses, but nothing really fits the bill; maybe their pre-approval period is coming to an end. They make a snap judgment or a quick emotional decision to buy a house, which they end up regretting afterwards. “Never make an investment of this amount of money based on pressure to make a decision,” she says. “There are ways to extend a pre-approval. There is normally something we can do as realtors to help you get what it is that you need.”
4. Spending before you take possession
Once you’ve been approved and the deal is firm, resist the temptation to start shopping for your new home. Fairley has seen buyers do this—in excitement, they rush out to buy furniture or purchase a car. What they don’t realize is that the lender who approved you is going to check your credit just before closing to make sure everything is still in line. She has seen cases where mortgages are declined at the last hour. “Buyers are now no longer able to close the deal because the mortgage company is saying, ‘Sorry, your debt ratio is way out of line’.” Not only is this heartbreaking, says Fairley, it could potentially result in a lawsuit, which everyone wants to avoid. Save any purchases until after your closing date. If you have to buy furnishings in advance, do so with cash.
5. Not shopping around for mortgage rates
“A lot of people think that every mortgage company they approach is going to result in a hard ding on their credit score and it’s not, it’s normally a soft inquiry,” says Fairley. Sometimes the big five banks are great because they have a personal history of your accounts and they can physically see what’s going in and out of them, but they tend to fit everyone into a smaller box when it comes to approvals. Mortgage brokers, on the other hand, have a bit more flexibility. There’s definitely more paperwork involved but it could result in better mortgage and interest rates.
Keep in mind, all of Fairley’s advice is based on a regular year—not one as different as 2020. Right now, the market is on fire, she says. “From May onward it has been a rolling ball of craziness for the city. We all have buyers lined up trying to find similar properties. We have multiple offers everywhere, which can be frustrating for buyers.”
It is not uncommon for homes right now to receive anywhere from 2 to 15 offers. “A lot of folks from Southern Ontario, not just Toronto, are trying to either move up here if they can work from home or invest up here because it’s affordable. It’s great for the city and as Realtors we love seeing our community grow but this unexpected growth means we’re all fighting for the same thing, so it’s hard and stressful on all buyers.”
All the more reason, then, to follow her advice and avoid the most common homebuying mistakes.