Common Mistakes to Avoid as a First Time Home Buyer

July 3, 2024

Golden Homes

As you settle into your first home that seems oh-so-perfect, the last thing you want to be saying is “oops as you realize that it isn’t

A house is likely one of the most expensive purchases you’ll ever make—and because it’s not something you can bring back to the store and exchange for another item within 30 days, the goal is to get it right the first time.

Here at Golden Homes—one of the leading builders in Chestermere—we’re sharing smart tips to keep in mind as you embark on your first time home buyer journey. Whether you’re looking for a property in Chestermere communities or anywhere else in the world, here are 11 of the most common mistakes you’ll want to avoid:

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1. Buying More Than You Can Afford

There’s no doubt that you deserve to live in the home of your dreams—but sometimes that “dream home” can be a bit beyond the budget you have in mind. Even after spending a lot on a home, it’s important that you’re still able to seamlessly manage your finances without experiencing too much strain. From sudden major repairs to income reduction, various unexpected situations can arise, and you don’t want to be caught off-guard. That’s why it’s best to have enough “emergency funds” and not buy more than you can actually afford. 

2. Not Getting Pre-Approved for a Mortgage

This might bring you to the question “How much can I afford?”

That’s where the importance of getting pre-approved for a mortgage comes into the picture of the first time home buyer journey. Without a pre-approval, you won’t know how much you can afford, which can lead to looking at homes outside your budget. You don’t want to waste all that house hunting energy by looking at properties that you won’t be able to afford down the line. 

3. Not Shopping Around for a Mortgage

We can’t possibly touch on the importance of getting pre-approved for a mortgage without emphasizing how crucial it is to shop around for a mortgage.

Different lenders can offer widely varying rates and terms. From fixed-rate and adjustable-rate mortgages, understanding these terms is crucial to choosing the one that best suits your financial situation. Ultimately, don’t just accept the first mortgage offer you get—always weigh out your options.

FeatureFixed-Rate MortgageAdjustable-Rate Mortgage (ARM)
Interest RateUnchanging for the life of the loanStarts lower, but adjusts over time
Monthly PaymentsConsistent throughout the termUsually lower initially, then can fluctuate
Rate PredictabilityPredictable, no fluctuationUnpredictable, subject to market changes
Best ForBuyers seeking stability and long-term occupancyBuyers planning to sell/refinance early or who anticipate rate declines
Risk LevelLower risk of changing paymentsHigher risk of payment changes and potential increases
Initial CostPotentially higher rate at the outsetOften lower introductory rate
ComplexityStraightforwardMore complex due to rate adjustment mechanisms
Term LengthsCommon terms are 15, 20, 30 yearsInitial fixed period (e.g., 5, 7, 10 years), then adjusts annually or as agreed
Interest Rate CapsNot applicable (rate does not change)Caps limit the adjustment amount per period and over the loan’s life
Long-Term PlanningSuited for long-term financial planningRequires careful consideration of future rate adjustments

4. Underestimating the Importance of Credit Scores

First time homebuyers often make the mistake of underestimating the importance of their credit scores. You have to keep in mind that your credit score directly impacts your mortgage rate. Lenders use your credit score as a way to assess your creditworthiness and determine the level of risk they are taking by lending you money. It’s essential to know your score and improve it if necessary before applying for a loan as it plays a crucial role in determining the interest rate you will receive on your mortgage.

Even a small difference in interest rate can have a significant impact on your monthly mortgage payments and the overall cost of your loan.

If you have a higher credit score, you will likely qualify for a lower interest rate, which can save you thousands of dollars over the life of your mortgage. On the other hand, a lower credit score may result in a higher interest rate, making your monthly payments more expensive.

To avoid this mistake, take the time to review your credit report and improve your credit score before applying for a mortgage. Start by paying your bills on time, reducing your outstanding debt, and avoiding opening new lines of credit. Be sure to check your credit report for any errors or discrepancies and report them to the credit bureaus to ensure your score accurately reflects your credit.

5. Overlooking Additional Costs

Apart from the price of the house itself, remember that you have to account for closing costs, property taxes, insurance, maintenance, and potential renovations as well.

6. Not Doing Research on the Neighbourhood

Another one of the biggest first time home buyer mistakes you could make is not looking at the bigger picture. It’s not just about the house itself—the neighbourhood it sits in affects your overall living experience and the resale value as well.

From unbearable traffic to hazardous industrial zones, these types of red flags can send anyone running away from even the most ideal homes. And you’ll want to know if any of these red flags are waving themselves in the wind before you seal the deal on the property. That’s why you want to spend some time in the area doing enough research—cecoming more familiar with the neighbourhood will help you figure out if it’s the right fit for you.

You might also want to consider dropping by the area on weekends so you can chat with your potential new neighbours and get their insights on the community.

7. Failing to Consider Future Needs

While there’s no time like the present, it pays off to look a bit into the future every once in a while—especially if you’re a first-time home buyer.

Think ahead about your long-term plans. For example, a sleek condo might not be the ideal choice if you’re planning to start a family soon. Or, if the property is too far away from a high school, it might be too much of a hassle to drive to it every day once your kids graduate from middle school. 

8. Ignoring Government Programs

There are often programs available specifically to help first-time home buyers, like tax incentives or down payment assistance—and you don’t want to miss out! Learn more about them in the table below:

First-Time Home Buyer Incentive (FTHBI)A shared equity mortgage with the government to reduce mortgage payments.5% or 10% of the home’s purchase price to put toward a down payment.First-time home buyers within income and borrowing limits.
Home Buyers’ Plan (HBP)Withdrawal of RRSP funds for home purchase.Withdraw up to $35,000 from RRSPs tax-free.Must be a first-time home buyer and meet other RRSP withdrawal conditions.
First-Time Home Buyer Tax Credit (FTHBTC)A non-refundable tax credit to assist with the purchase costs.Up to $750 in federal tax relief.Must be a first-time home buyer and meet certain purchase and property criteria.
GST/HST New Housing RebateRebate on GST or the federal part of the HST for new homes or major renovations.Varies based on the GST/HST paid.Buyers of new homes, owners who undertake major renovations or additions.
Land Transfer Tax RebatesRebates on the land transfer tax.Amount varies by province.First-time home buyers in participating provinces.
Affordable Housing ProgramsProvincial and municipal housing initiatives.Varies by program (could include down payment assistance, subsidized interest rates, etc.).Often based on income, location, and other specific criteria.
CMHC InsuranceMortgage loan insurance for buyers with less than a 20% down payment.Allows for a down payment as low as 5%.Purchasers with less than a 20% down payment.

9. Not Thinking About Resale Value

Even if you’re not planning to move soon, wouldn’t you want the peace of mind of knowing that you’ve invested your money in the right place? Many first time home buyers fail to consider the home’s potential resale value for the future.

CategoryFactorImpact on Resale Value
LocationProximity to amenities, neighbourhood, local economyHigh impact; desirable locations can significantly increase value
Market ConditionsInterest rates, market trends, inventory levelsMarket fluctuations can raise or lower value depending on timing
Property ConditionAge, maintenance, upgrades, curb appealWell-maintained and updated homes usually fetch higher prices
Home Size and LayoutSquare footage, functional layout, bedrooms/bathroomsLarger homes and efficient layouts tend to be more valuable
External FactorsSchool districts, crime rates, zoning, and developmentGood schools and safe neighbourhoods attract buyers; planned developments can be a boon or a bane
Internal FeaturesEnergy efficiency, modern conveniences, home decorModern, efficient homes with up-to-date features are preferred by buyers
Unique FeaturesViews, privacy, specialty roomsHomes with unique, in-demand features may see increased value

10. Waiving A Home Inspection

One common mistake that first-time home buyers often make is waiving a home inspection. In the excitement of finding their dream home or the fear of losing out on a competitive offer, many buyers may be tempted to skip this crucial step. However, waiving a thorough home inspection can lead to significant problems and financial burdens down the line.

What is a Home Inspection?

A home inspection is a professional assessment of the condition of the property. It helps identify any hidden issues, structural problems, or potential hazards that may not be obvious to an untrained eye.

Additionally, a home inspection report can provide valuable negotiation power. If the inspection identifies any significant issues, you can negotiate with the seller for repairs or a reduction in the price. Without an inspection, you may be left unaware of any potential problems and have no recourse for addressing them after the purchase.

While a home inspection isn’t a guarantee that you will find every single flaw in the property, it provides a reasonable level of assurance and protects your interests as a buyer. It allows you to make an informed decision and gives you an opportunity to avoid any surprises or unexpected expenses.

To ensure a smooth first time home buyer journey, hire a qualified and reputable home inspector. Look for inspectors who are licensed, experienced, and have a good reputation in the industry.

11. Not Establishing Your Home-Buying Priorities

As you walk through your first time home buyer journey, you’ll quickly realize that it’s quite challenging to find a home that ticks all the boxes. It helps to figure out what matters to you most—and then lean toward the homes that embody those aspects.

First time home buyers looking around in Golden Homes’ Chestermere communities

Why First Time Home Buyers Trust Us

What if you’ve looked left and right but still haven’t found the right property?

That could be your neon sign to head into the direction of Golden Homes. 

As a team of premier Chestermere home builders, we continue to uphold a tradition of trust through houses that feature solid, trustworthy designs with a contemporary edge.

Whether you choose from our carefully crafted models in Chestermere communities or bring us your vision for a custom home—you’ll always find a space that leaves you feeling welcome, comfortable, and ready to live your life to the fullest.

Explore our new homes for sale in Chestermere or contact us to discover more about our home models and custom-build process. 

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