Top Mistakes First-Time Buyers Make
Author: Tracy Ruddell
First-time buyers represent over half of the GTA market right now thanks to low mortgage rates pushing up against skyrocketing rents. Young buyers are feeling a sense of urgency to get a foot on the property ladder as soon as possible given the insane levels of annual price appreciation we’re seeing on Toronto homes for sale. Yet, a lot of first-time buyers are so focused on saving for a down payment and how to navigate the major listings shortage that we’re under that they don’t take the time required to educate themselves before starting the property hunt, jumping too fast on that hot new listing.
If you’re a first-time buyer, a great Toronto REALTOR® will walk you through all of the basics before taking you to look at homes but it’s always a good idea to do your own research in advance. To get you started, here are some of the most common mistakes we see first-time buyers make that you’ll want to avoid.
One of the more common mistakes that first-time buyers make is not getting pre-approved for their mortgage.
We’ll talk more soon about what mortgage pre-approval is and what it’s not; in short, it’s not a guarantee of receiving the loan you require to buy a home but it is a strong indication that your chosen lender will approve you when the time comes and for how much. Without pre-approval, you can’t be sure of how high you can safely bid on a home and it puts you in a precarious situation come offer night. In this market, the reality is that you may have to make a firm offer in order to win in a competitive, multiple bid situation and you shouldn’t take that risk without mortgage pre-approval.
Unfortunately, failure to close due to finances happens. In fact, it happen more often than you may think. Buyers bid what they believe they can comfortably afford only to find out a few weeks from closing that they can’t find a lender willing to approve them for that amount. Should you fail to close and have to back out of the deal, you will likely lose your initial deposit and could be sued for more damages.
Going hand-in-hand with this is the mistake of not clearing the source of your down payment with your lender as part of the pre-approval process. If your down payment includes funds from any source other than your own savings account or cashable investments, make sure that you clear this with your lender. You may not be able to borrow money from family member or a line of credit, for example, and still qualify for the mortgage loan. Better to find out now and look at alternatives than find out after your offer is accepted and you're now on the hook.