5 Common Mistakes of First Time Homebuyers

Taking on Too Much Debt

So how much is too much?

The rule of thumb is for monthly installments not to be more than 33% of your monthly income (if you need to take debt to buy your first home). Don’t get influenced by the bank telling you that you can afford a property when you already know that it will be a major strain for you. What the bank says you can afford and what you know you can afford or are comfortable paying are not necessarily the same.

Forgetting to Calculate Additional Costs

In addition to the purchase price, you need to consider the following:

  • Notary costs
  • Tax
  • Agent fees

If taking on a mortgage, you need to pay insurance premiums and and loan processing fees on top of the interest on the loan.

Once you own the property, you will need to pay annual property tax and maintenance costs.

  • For apartments, there will be monthly maintenance and service fees. The money is used for general maintenance of shared areas of the apartment (lights for the corridor, parking lobby, etc).
  • If you buy a house, don’t forget to consider maintenance costs to repair the house (leaking roofs, paint, etc). Insurance against fire and natural disasters is also advisable.

Not Inspecting the Property Carefully

Nothing beats ground inspection. Inspect your prospective property carefully before deciding to buy it. Ideally, do so at different times of the day --- during the day, afternoon, night. Get a feel the surrounding area --- is the home too hot or too cold during different times of the day? Is the area safe? How accessible is the area at different times of the day or during weekend vs weekday.

Not Knowing What to Compromise and What Not to

It is not likely that one property will tick all of the criteria we have set (and still be affordable).

Be prepared to compromise certain things such as the color of the tiles in the bathroom (unless it is neon green and purple!).

On the other hand, don't compromise on the important things. For example, don't get a two-bedroom home when you know you're planning to have kids and will need three bedrooms.

Not Thinking of Future

While no one can know what the future will look, one can try to avoid unpleasant surprises down the road.

First ask yourself and discuss with your partner, how long you plan to stay in that house? If it will be for more than 10 years, picture how the neighborhood may look like 10 years from now. Look into things like…

  • What kind of development plans are in the works for your neighborhood in the future?
  • Is your street likely to become a major street or a popular rush-hour shortcut?
  • Will a highway be built in your backyard in five years?
  • If there is a lot of undeveloped land, what is likely to get built there?
  • Have home values in the neighborhood been declining?

A home is one of the major purchases you will make in your life. Make sure you have really considered all possible angles and are making an informed decision. 

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