1. Not Knowing What You Can Afford

As we've all learned from the subprime mortgage mess in the U.S., what the bank says you can afford and what you know you can afford or are comfortable with paying are not necessarily the same. If you don't already have a budget, make a list of all your monthly expenses (excluding rent), including vehicle costs, student loan payments, credit card payments, groceries, health insurance, retirement savings and so on. Don't forget major expenses that only occur once a year, like any insurance premiums you pay annually or annual vacations. Subtract this total from your take-home pay and you'll know how much you can spend on your new home each month.

If you end up looking at homes that are outside your price range, you'll end up lusting after something you can't afford, which can put you in the dangerous position of trying to stretch beyond your means financially or cause you to feel unsatisfied with what you actually can afford. You may even learn that you can't afford the type or size of home that you desire and that you need to work on reducing your monthly expenses and/or increasing your income before you even start looking.

2. Skipping Mortgage Qualification

What you think you can afford and what the bank is willing to lend you may not match up, especially if you have poor credit or unstable income, so make sure to get pre-approved for a loan before placing an offer on a home. If you don't, you'll be wasting the seller's time, the seller's agent's time, and your agent's time if you sign a contract and then discover later that the bank won't lend you what you need, or that it's only willing to give you a mortgage that you find unacceptable. Usually if you get a mortgage commitment from a reputable financial institution it will give you negotiating strength when your offer is presented... and can usually save you money. Be aware that even if you have been pre-approved for a mortgage, your loan can fall through at the last minute if you do something to alter your credit score, like finance a car purchase. If you cause the deal to fall through, you may have to forfeit the several thousand dollars that you put up when you went under contract.

3. Failing to Consider Additional Expenses

Once you're a homeowner, you'll have additional expenses on top of your monthly payment. Unlike when you were a renter, you'll be responsible for paying property taxes, insuring your home against disasters and making any repairs the house needs (which will occasionally include expensive items like a new roof or a new furnace). If you're interested in purchasing a condo, you'll have to pay maintenance costs monthly regardless of whether anything needs fixing because you'll be part of a homeowner's association, which collects funds monthly from the owners of each unit in the building in the form of condominium fees and deposits the fees into a reserve fund.

4. Being Too Picky

Go ahead and put everything you can think of on your new home wish list, but don't be so inflexible that you end up continuing to rent for significantly longer than you really want. First-time homebuyers often have to compromise on something because their funds are limited. You may have to live on a busy street, accept outdated decor, make some repairs to the home, or forgo that extra bedroom. Of course, you can always choose to continue renting until you can afford everything on your list - you'll just have to decide how important it is for you to become a homeowner now rather than in a couple of years.

5. Lacking Vision

Even if you can't afford to replace the hideous wallpaper in the bathroom now, it might be worth it to live with it for a while in exchange for getting into a house you can afford. If the home otherwise meets your needs in terms of the big things that are difficult to change, such as location and size, don't let physical imperfections turn you away. Besides, doing home upgrades yourself, even when you have to hire a contractor, is often cheaper than paying the increased home value to a seller who has already done the work for you.

6. Being Swept Away by Frills

Minor upgrades and cosmetic fixes are inexpensive and help the seller get a much higher price tag. Sellers may pay $2,000 for minimal upgrades or "staging" and you'll end up paying a premium price. If you're on a budget, look for homes whose full potential has yet to be realized. Also, first-time homebuyers should always look for a house they can add value to, as this ensures a bump in equity to help you up the property ladder.

7. Failing to Compromise on the Important Things

Don't get a two-bedroom home when you know you're planning to have children and will want three bedrooms. By the same token, don't buy a condo just because it's cheaper when one of the main reasons you're over apartment life is because you hate sharing walls with neighbors. It's true that you'll probably have to make some compromises to be able to afford your first home, but don't make a compromise that will be a major strain.

8. Neglecting to Inspect

It's tempting to think that you're a homeowner the moment you sign the Agreement of Purchase and Sale, but not so fast - before you close on the sale, you need to know what kind of shape the house is in. You don't want to get stuck with a money pit or with the headache of performing a lot of unexpected repairs. Keeping your emotions in check until you have a full picture of the house's physical condition and the soundness of your potential investment will help you avoid making a serious financial mistake.

Before signing anything, hire a professional inspector ...with proper credentials. Buyers should find and hire their own inspector independently of the realtor to ensure there is no conflict of interest. You should choose from at least three companies.

9. Not Choosing to Hire an Agent or Using the Seller's Agent

Once you're seriously shopping for a home, don't walk into an open house without having an agent (or at least being prepared to throw out a name of someone you're supposedly working with). Agents are held to the ethical rule that they must act in both the seller and the buyer parties' best interests, but you can see how that might not work in your best interest if you start dealing with a seller's agent before contacting one of your own.

10. Not Thinking About the Future

It's impossible to perfectly predict the future of your chosen neighborhood, but paying attention to the information that is available to you now can help you avoid unpleasant surprises down the road. A visit to the municipal office is suggested.

11. Assuming Foreclosures are Great Deals.

Just because the previous owner owed $450,000 on a house before the bank took it over doesn't mean its worth that much now. You may not be getting the bargain you think with a foreclosure. In most cases nothing is warranted. Also, most homes owned by lenders or banks have been sitting vacant for months and may have been vandalized. That could require extensive renovation or repair. Weigh the costs of fixing up the property against the savings you will likely reap by buying a lower-priced foreclosed home.

12. Letting your true feelings show.

No matter how much you've fallen in love with a house, don't let the seller's agent in on it. Otherwise, they will gain the upper hand in negotiations.

13. Failing to find a good Buyer's Agent - (ABR designation).

Getting a mortgage is tough these days. So buyers should rely heavily on knowledgeable agents to help them get their finances in order. After all, buyer's agents have a fiduciary responsibility to the buyer exclusively -- and should be looking out for their best interests. Consider using an agent recommended by a relative or friend who was satisfied with their professional services. Interview each candidate about their experience, make sure their credentials are bona fide ... repeat make sure their credentials are genuine. Ask if they have worked with first-time buyers before and what kind of service you will get from them.

14. Underestimating the costs of owning a home.

Many home buyers don't anticipate the additional costs for repair and maintenance, or for an increase in utility costs. Consider the age of your new home and how well it has been treated by the previous owners in your budget. Be prepared to set aside a small percentage (1% at most) of the home's purchase price annually for repairs and upkeep.

15. Failing to budget for property taxes.

Property taxes and the likelihood that they will climb over the course of your time in the house should be factored into any home-buying budget. To get an idea of how much you will be paying, call the local assessor's office or talk to people in the neighborhood or if you are under a buyer's contract with your agent ask them to check.

16. Assuming your first offer will get accepted.

As home prices get even more affordable, competition is bound to heat up ...especially in very desirable neighbourhoods. You can't assume you will walk in there, make the offer and get it. Try not to get discouraged if you lose out on the first or second house you make an offer on. Sooner or later you will get your dream home.

17. Shortcutting the inspection processby using Unqualified Relatives or Friends to do the home inspection.

This can involve skipping a whole house inspection completely in order to save the relatively small amount of money involved … or it may involve using a friend or relative with limited experience to conduct the inspection. In either case you run the risk of not exposing potentially expensive--or even hazardous-- defects in the property. Protect yourself and invest the $300 to $500 for a professional inspection. Relatives and friends are not usually accountable and their well intended advice can cost you a lot of money.

18. Doing too much too fast.

Some buyers want to make the house their own right away. They overextend themselves on credit to do so, and assume the improvement will pay for itself by increasing the home's value... but, that is not always the case. Instead, buyers need to have patience and make changes over time otherwise they can over improve their home for the neighbourhood.

19. Failing to include a contingency clause in the contract.

A mortgage financing contingency clause protects you if, say, you lose your job and the loan falls through or the appraisal price comes in under the purchase price. Should one of these events occur, the buyer gets back the money that was used to secure the property. Without the clause, buyer can lose that money and still be obligated to buy the house.

20. Not knowing your credit score

A credit rating is a record of your credit history and current financial situation . A good credit rating can improve your ability to get loans, so if your score is low, you may want to work on improving it before you apply for a mortgage.

21. Not researching down payment choices

Lenders typically require CMHC mortgage loan insurance if you make a down payment of less than 20 per cent, and premiums for that insurance can be as high as 3.25 per cent of the value of the loan. Under the Home Buyers' Plan, first-time buyers can use up to $25,000 in RRSP savings ($50,000 for a couple) for a down payment. A higher down payment will save thousands of dollars in interest over the life of your mortgage.

22. Focusing too much on interest rates

First-time home buyers rush in to the market when interest rates are low. While rates are important, other things have a greater bearing on the overall cost of home ownership, including the cost of the house, the type of mortgage, the amortization period and payment options.

23. Not choosing your own payment schedule

Paying off your mortgage sooner saves you interest costs, while a longer amortization period reduces your regular payment and frees up cash flow. You can save thousands of dollars in interest by choosing a shorter amortization period, paying bi-monthly instead of monthly, or increasing the amount of payments by even a small amount. Use an online mortgage calculator to run the numbers. Some mortgages allow lump sum payments on the anniversary of the mortgage.

24. Forgetting about closing costs or miscalculating them.

When calculating closing costs, assume you will need an additional 1.5 to 2.5 per cent of the purchase price to cover such things as the home inspection, legal fees, land transfer tax, property tax, property insurance, utility hook-ups and moving costs.

25. Not using qualified persons to do the estimates for renovations if required.

When the renovation is donethe cost of it could be substantially higherthan originally estimated causing undue financial hardship.

26. Failing to ask for a full disclosure statement from the previous owner regarding any problems associated with the house.

TheSPIS - Seller's Property Information Sheetshould be available for inspection by the potential purchaser.

27. Going further into debt after making the purchase with unnecessary and frivolous expenditures.

Adding swimming pools, hot tubs and other luxuries should not be done until the homeowners are financial stable ...otherwise it will add to the financial load homeowners are carrying.

28. Not calculating a budget properly... making mistakes in calculations, estimates and costs.

These mistakes can add to the financial burden.

29. Choosing a home too far out of town.

The three rules of real estate are location, location, location. The miles add up fast and the cost in extra gasoline, wear and tear on the car, and plain old fatigue from driving can be soul destroying. Add in the amount of traffic on the routes you take … and you may be set for another move shortly.

30. Falling in love with the house … and making irrational decisions.

31. Over- buying the first time.

Being "house poor" is a very uncomfortable existence. A large and beautiful home with little or no furniture tends to be empty and cold. A life where almost every dime of your earnings goes to the support of your house wears thin very quickly and is a frequent cause of family stress and can make homeowners make irrational decisions. Pushing yourself right up to … or beyond … your limits leaves you highly exposed when the inevitable changes to the national or your personal economy occur. Leave yourself some breathing room.

32. Finding out too late that you have no representation.

This can be a real nasty surprise when you assume that the Agent with whom you are working represents you when they actually represent…and owe complete allegiance to…the seller. How does this happen? By not taking the time to investigate and familiarize yourself with the laws regarding Agency. Or, by rushing out to look at homes, whether in person or on the Internet, and contacting the Agent who has the house advertised (who will be the listing Agent and will absolutely represent the seller). Another pitfall occurs when you try to represent yourself in the purchase of a home, thinking that you will save money. This may be the case, but it is just as…or more… likely that you will run into a savvy seller who is looking to keep the commission savings in their pocket rather than give it to you. In addition, without representation and the use of a Comparative Market Analysis from a buyer's agent, how do you determine a realistic selling price for a property?

33. Not shopping around and comparing mortgages.

There are far too many variables --type of mortgage, term, lender and amount of points to mention a few--not to investigate all of your options. Don't simply accept the first plan presented to you, whether it is from a mortgage broker, an Agent or on the recommendation of a friend or relative. Spend time comparing to get the most advantageous plan for your requirements and financial situation.

34. Planning on doing renovations and improvements yourself and then finding out trained professionals are required.

Many new homeowners plan on doing renovations and improvements themselves and then become overwhelmed with the job and find they cannot do them and have to hire qualified professional help. Unprofessional renovations are a huge negative factor in calculating the value of your home.

35. Waiting for the "perfect" home.

Many first time buyers make the mistake that they will, if they look around long enough, find a home that has a full 100% of their needs and wants. With the thousands of variables available in housing, including location, style, size, amenities and condition, this is almost always an unrealistic goal. There are two potential problems with this strategy: First, these buyers pass by homes that meet 90% or more of their requirements only to eventually give up (often purchasing homes with less of their requirements because they are worn out!) … and second, while they are waiting for the "perfect" home, housing market prices (and often mortgage rates) continue to rise, adding expense to their purchase. Instead, it makes sense to determine the most important of your needs and the most desired of your wants and selecting a home that meets the majority of them.

36. Not listening to the advice of their real estate agent.

Ontario real estate agents are the most qualified in the country. An agent with bona fide credentials will know what they are talking about and can give excellent advice.


***** Note - Diane Way has a great deal of patience and a documented record of dealing with First Time Buyers … with very positive results. She will gladly take your call … and take you as a client …… Cell - 416.402.3916

Diane's unblemished 25 year record in real estate is a testimonial in itself.