3 Mortgage Mistakes You Can’t Afford
When buying a new home, there are many precautions that you need to take in order to make sure that you buy a solid and sturdy home, don’t get in over your head, and so that you are as happy in 30 years as you will be today.
This is especially true for first time home buyers, who have little to no experience navigating the home buying process. So with that being said, we’d like to share the top 5 mistakes that new home buyers make, and how you can avoid them.
1. More Home than You Can Afford
It happens to everyone – you see a home outside of your price range, but absolutely have to have it. So the appraiser or loan officer pulls a few strings and suddenly, you’re in! Then the payments are due, and over time, you lose the ability to pay for the home, and either have to sell for a loss, or lose it all together.
It’s very easy to get tempted into buying more home than you can afford, but try to be sensible and keep emotion out of the equation.
2. 100% Loans
Granted, these work when used responsibly, but there are risks nonetheless. When you don’t put any money down, your loan to value is usually at least 100%, if not 110% or more. This means that you owe more than the home is worth. So what happens then if disaster strikes and your home is a total loss? Your insurance company will only pay the value, and you’ll be out the extra money. Additionally, if you need to sell any time in the next 3-5 years, you will probably have to sell at a loss, especially if there is a drop in the market and your home loses value. Try to put at least 5-10% down to ensure that this doesn’t happen.
3. Disregarding Inspection
The inspection exists for a reason, which is so that you can make sure you are aware of each and every default in your new home, which will prevent you from future surprises with home repairs. The problems that occur here are when buyers become so in love with their new home that they ignore major problems with the home, thinking that in the end, it’ll be alright. Then, the next thing you know, the roof leaks, the foundation slips, or a wall falls down. Make sure that you analyze each and every word from the inspector and then use that report to negotiate repairs or reduced cost from the buyer. Otherwise, you could be out a heap of money when something goes wrong.
Now that you are on the path to shopping for your first home, take a look at our free mortgage calculator & mortgage quotes section, where you can play with several variables, such as loan value, interest rate, and deposit amount in order to see how much home you can afford and/or how much you’ll pay for that beautiful home you saw in the paper. The Canadian mortgage calculator is specially designed for you, and is a great first step in narrowing down the kind of home you should be looking for. Better yet, use the mortgage calculator and you’ll also get five free mortgage quotes from local loan providers; there’s no obligation, and no cost to you.