To help you feel even more confident as a homeowner, we added four common pitfalls that can be avoided.
Need to go back and review the other mistakes? Read them here.
1. Not Considering a Mortgage Pre-Approval
By getting a pre-approved mortgage rate, you will know roughly the amount you will be approved for. This estimation will give you the confidence to begin looking for homes you can afford. Once you find your dream home, it will be easier to make a purchase offer.
Additionally, restate agents will know you are a serious buyer and will be able to serve you better.
2. Not Choosing Your Mortgage Payments Schedule
It is possible to customize your amortization period depending on how much you can afford. Because paying off your mortgage sooner saves you interest costs, a more extended amortization period reduces the regular payment amount and gives more room to manage cash flow.
However, extended amortizations aren't for everyone because they increase interest rates and monthly payments that may not be affordable for all borrowers. Consider a 25-year amortization because if you extend the amortization further, it will increase the interest costs over the mortgage lifespan. Also, when considering a longer amortization, it is essential to strategize a way to reduce amortization over the life of the mortgage.
Buying and owning a home is one of your life's most significant financial investments. Creditor insurance is essential as it helps to protect your investment from life’s uncertainties and gives you the confidence of knowing that your investment is protected.
3. Forgetting About Closing Costs
You’ve put a lot of time and effort into finding your dream house, but now it's time to figure out how much money you'll need for closing costs. These can vary depending on where in Canada or overseas. They may also include legal fees if there are any issues with title search before purchasing property and interest rates charged by lenders at different intervals.
So make sure not only do these numbers add up correctly - but choose an amount that will leave the room for any surprises. When calculating the closing costs, it is fair to assume addition of 1.5% is necessary to cover costs such as:
Professional home inspection:
Condition your offer upon a home inspection to protect yourself from costly repairs. Make sure you inspect the property before signing any documents and that its condition has not changed since it was last inspected by someone other than just home inspectors. A builder warranty program usually covers newly built homes.
Lawyer or notary fees:
Working with an experienced real estate lawyer/notary professional is essential to ensure all legal aspects of the home purchase are correctly completed.
Land transfer tax:
Most provinces levy a one-time tax based on a percentage of the home’s purchase price.
Property tax/utility bill adjustments:
The purchase price of a resale home is always payable subject to the usual adjustments at closing. Any amount that has been prepaid will be adjusted, so you pay back excess funds and vice versa. The most common adjustment occurs on property taxes or utility bills which were paid ahead of time for both parties to receive their desired outcome as quickly as possible.
Property taxes can be a pain, and the best way to take control of them is by paying your property tax bill directly where applicable and ensuring you're getting all the benefits from this money that the tax agency has promised you.
Property insurance:
Property insurance can provide you with the security of protecting the things you value: your home, personal belongings, and financial future. Choosing the right insurance company is essential; make sure they offer a range of choices to personalize your insurance to meet your needs.
Moving costs:
Have a budget for the cost of hiring a professional mover; decorating costs; and fees for cable, wifi, and other utilities.
Ongoing costs:
Don’t forget to budget for the cost of home maintenance, such as heating, electricity, water, repairs and taxes. We suggest a yearly budget of at least 1% of your home’s value.
4. Not Knowing your Credit Rating
Credit ratings are a way to measure your financial situation, which can help you get loans or mortgages. Lenders will rely on your credit rating to verify your repayment history.
To qualify for a mortgage and improve your credit rating, you should always make at least the minimum payments on credit cards, loans, or any bills on time.
Still confused about rates? Read our blog post here.
Bottom Line
So, if you're in the market for a new home, avoid these common mistakes and get started on the right foot. Applying for a mortgage pre-approval is always a good idea, as is choosing your mortgage payments schedule ahead of time. And don't forget about closing costs - they can add up! Finally, check your credit rating so you know where you stand and what kind of interest rate you can expect from potential lenders.
By avoiding these mistakes and following our simple tips, you'll be well to finding the perfect home for you and your family.
Our team of mortgage experts is here to help you through every step of the process so that you can easily purchase your dream home. Apply today.