3 Mortgage Mistakes You Can’t Afford – When buying a new home, there are many precautions you need to take to ensure 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 with little to no experience navigating home buying. So with that being said, we’d like to share the top 5 mistakes 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 your price range but 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 altogether.
It’s straightforward to get tempted into buying more homes 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 at 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 this doesn’t happen. See
3. Disregarding Inspection
The Inspection exists for a reason: to make sure you are aware of every default in your new home, which will prevent you from future surprises with home repairs. The problems here are when buyers become so in love with their new home that they ignore significant issues with the house, 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. Make sure you analyze every word from the inspector and then use that report to negotiate repairs or reduced costs from the buyer. Otherwise, you could be out 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, to see how much home you can afford and 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 significant 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.