Looking To Buy Your First Home? Avoid These Common Mistakes.
Three years into being a home owner, here’s what I’ve learned.
Spend less than you can afford
Getting pre-approved for a mortgage is an exciting moment. But don’t feel you have to spend the maximum a bank will lend you. Smart investors don’t put all their cash into a single asset, and nobody enjoys being too house poor to enjoy a vacation or the occasional meal out. It can be tricky not to overspend, especially if you’re looking to buy in a competitive market, or have fallen in love with a property at the top end of your budget. Try to remember that being a homeowner comes with additional expenses, like unexpected repairs and property tax hikes. Plus you have to furnish the place! Having some space in your monthly budget will save you a lot of stress in the long run, and you can even choose to increase your mortgage payment, potentially saving thousands of dollars in interest.
Do not fear the fixer upper… but go in with your eyes WIDE open.
My husband and I knew we were looking for a project. My family have always looked at homes this way; my step-dad is a contractor, and built my Mum’s current place by adding an extra story to an old post-war bungalow. My Dad once bought a mobility adapted house that had an elevator that descended into the middle of the living room. So I was raised with a firm belief in the power of ‘sweat equity’, and am pretty handy with a paint roller. My husband, meanwhile, is a handy guy who has done some professional renovations and likes doing things himself. As Mr Money Moustache eloquently describes here using the principle of hedonic adaptation, it’s a lot more rewarding to craft your dream home over time than to move into a shiny new build with that year’s most popular granite countertops.
That said, you have to know exactly what you’re getting yourself into, and be prepared for a little short term suffering. We bought a foreclosed condo, which was an excellent bargain in our overpriced town, but the terms of the deal meant we wouldn’t get to inspect the place until the day we picked up the keys. A little scary, but since it was a condo and we could review the building reports, we knew that we wouldn’t be dealing with any structural or utilities issues. A full gut job was the worst case scenario, and we were prepared to take that on. If we were buying a whole house, I’d want to have thorough inspections before making any purchasing decisions, especially on older homes; subsidence, sewer issues, asbestos and outdated wiring can get really expensive, really fast. Better to invest in a good building inspector now than pay the price later.
Even our cosmetic renovation of a pretty small unit was a lot of work. We had five weeks to make the place liveable before moving out of our rental, while both working full time. In hindsight, this was utter insanity, but we were young and foolish and trying to save our pennies. Thankfully, we have lovely friends who pitched in many hours of labour with only pizza and gratitude for payment. After many tears of exhaustion and late night tiling sessions, the place was just about habitable in time. It took us another 4 months after move-in day to have the kitchen up and running, but that was mostly because we were worn out and needed a few weeks off DIY. We’re still fixing silly mistakes we made in all the hurry and finishing low priority items like the laundry room and stairs. We love our home even more because we, for the most part, made it ourselves. But you’ve got to enjoy the creative process, and be willing to live in a building site for a few weeks/months. Otherwise, consider spending a little extra on either a more modernized property or a good contractor.
Bigger isn’t always better
I live in Alberta, where buying a massive truck is a rite of passage for most dudes. Consequently, when gas prices go up, widespread panic ensues. Meanwhile, we’re running a low-emission hatchback with a 2 litre engine and barely even glance at the price on the pump; we rarely exceed our $100/month gas budget even with my husband commuting. The same principle applies to homes. So many people end up paying through the nose to heat rooms they barely use. Investing in efficient appliances, turning off lights and improving insulation are all great steps to lower your bills and your environmental impact. But none of them beat just buying a smaller home.
Now, I’m not saying you should cram a family of four into one of those awful new-build studios that feel like a prison cell. But a good layout, natural light and smart design choices will all contribute more to how you experience your home than simple square footage. One thing I observed while renting was that no matter the size of my place, I would end up accumulating enough stuff to slightly overfill it, making even a spacious apartment feel cluttered and small. Many of us think we need more storage space, when actually we might just need less junk.
We all have a long wish list for our homes, but it’s important to prioritize. Having a spare bedroom for visitors is nice, but if 95% of the time it’s a dumping ground for unused exercise equipment, is it really worth the extra mortgage payment? Save the difference, and you can put Mum and Dad up in a nice B&B next time they’re over. If you work from home, an office might be a must have; for others, even a small usable outdoor space is more valuable than an extra bedroom. Our condo is pretty tiny, but it has a full width balcony with big sliding doors off the living room. In the summer, it’s our favourite place to hang out, and the dog enjoys it even when temps hit -25C. Be really honest with yourself about what you need from your home day to day, and don’t be tempted to overspend on ‘more space’ that doesn’t have a clear purpose.
Location, location, location
If you like watching property shows, you’ll be familiar with the part where they show the buyers a home that checks ALL their boxes, and it’s in their budget…and only half an hour’s drive away from their preferred area! It’s a mean trick, even if they’re trying to bring a buyer’s inflated expectations back to reality. When you’re trying to stay on budget, it’s super tempting to eye up a slightly more distant suburb where you can have more property for a lower price. But be careful. Where you live is usually more important than what you live in. If you’re moving further away from friends, work, and your favourite haunts, the extra costs of driving, transit passes and late night cabs can really stack up. Not to mention wasted hours stuck in traffic or staring out of the bus window while your friends are getting stuck in to happy hour.
Our small town is also a tourist destination and priced accordingly. Once we’d decided we were ready to buy, every few months we would spot an attractive property in the next town over, only twenty minutes down the highway, and debate making the shift. A few friends had done it over the years… and we don’t see much of them any more. Ultimately, as nice as that town is, we knew it wasn’t the right fit. Our lives are here. So is our support network. We can pop out for a nice meal or a few drinks on a whim and stroll home afterwards. I can walk to work, or any of my friends’ houses, or jump on a free shuttle bus to the local ski hill (yeah, we’re pretty spoiled.) We’ll outgrow this town eventually, but for now it’s home. We were lucky to eventually find our place, but if we hadn’t, we would have kept on renting quite happily.
If you’re looking for a quieter life, or planning a big change like having a baby or working remotely, a new area might be totally right for you. But I’d recommend renting there for at least a few months to make sure it’s a good fit before committing to a mortgage. If you love where you live, don’t give it up for a bigger yard or a downstairs toilet. In Hallmark movies, the heroine always finds love and meaning in the rural small town she never wanted to live in. Here in the real world, your preferred lifestyle should dictate your location, not the other way around.
Buy when it’s right for you, not when you think you should
I remember being in my mid-20s and saying to my mother, “I’d like to own a home by the time I’m 30.” “Oh sweetheart,” she replied, “you’ll get there sooner than that.” For our parents’ generation, home ownership in your 20s was pretty normal. Though the conditions that made that possible have changed drastically, in a lot of places the expectation still persists. In the end, with very generous deposit contributions from both our families, my husband and I exchanged on our first home when I was 29 years and 6 months old. But my point isn’t that I achieved my goal. It’s that it was a stupid goal to begin with.
We weren’t ready to buy because we were a particular age. We were ready because we finally had jobs we liked that paid about enough, a solid relationship, and wanted to create a home together. We wanted the stability of owning and we wanted to be able to improve our own space. We also knew we’d be happy staying put in our town for at least another five years. Once those conditions were in place, the timing ultimately came down to finding the right property at the right price, which meant being patient. Like any other major life decision, rushing to meet an arbitrary deadline is an easy way to make a big mistake. So don’t feel pressured to take that step because you’ve had a big birthday, or all your friends are doing it, or you’re scared of getting priced out of the market. The stars might align in your thirties or your forties. Or you might rent quite happily for the rest of your life! Home ownership can be great, but it isn’t the right choice for everyone; don’t let peer pressure convince you otherwise.