With a never ending list of everything you ‘should do’ when purchasing a home, it seems counterproductive to focus on what you should not do. But being aware of the dont’s is just as important as the do’s, when it comes to making the biggest financial investment of your life. And knowing what not to do, just might land you better financing and the home of your dreams. It may seem obvious to not do certain things like switching your job or co-signing a loan, but did you ever think that depositing cash or financing a new piece of furniture could affect your ability to get a mortgage? As big as your ‘to do’ list is when purchasing a property, make sure you also have your ‘not to do’ list in close reach. Read on to make sure you are avoiding these common mistakes and what to be aware of before you make your first offer on a property. #1 Don’t overestimate what you can afford Before you even begin the search for that perfect property, it is essential that you get pre-approved. Looking for homes outside of your budget is a waste of your time and can wreak havoc on your emotions. And you will be disappointed if what you are pre-approved for is substantially less than what you thought. It is best to run the numbers yourself before meeting with a mortgage broker. Mortgage brokers will likely do a debt to loan ratio. Meaning, they take your monthly debt and divide it by your monthly income. Most mortgage brokers want to keep your debt to loan or DTI below 33%. So for example, if your debt is $1,500 a month (and debt accounts for debt obligations like car payments and student loans not bills like you cell phone or power bills) and you make $6,000 a month, your DTI is 25%. They will calculate your new monthly mortgage to make sure your overall DTI is below 33%. A great way to understand your own spending habits is to track them. There are a number of apps you can use like Mint or Itab that allows you to record your daily purchases. There is a section for you bills and you can calculate how much you are saving a month as well. Once you allot for things like taxes and vacations you will have a pretty good idea of where your money is going. Replace your rent or your current mortgage payment with a monthly mortgage payment you would feel comfortable with and make sure you are in that ballpark when getting a loan. You know your own lifestyle, if you like to travel and dine, than you may want to make sure you will have the disposable income that suits your own life. #2 Don’t get emotionally invested When you find that perfect home, it can be hard not to get emotionally attached. Depending on the time of year or the market you are in, there could be other offers on the property or things could go wrong like the home inspection and the offer could fall through. Go in the home buying process with high intention and low attachment. It will keep your spirits high when looking for that perfect place. #3 Don’t make any large purchases When you begin thinking about purchasing a home, make sure you avoid making any large purchases. Large purchases such as buying a new car, a new furniture set or a home entertainment center. Banks will look at your financial history and want to see any recent activity. The mortgage pre-approval you were given is based on how much money you had in your account and how much money you owed at the time you applied. If you make a large purchase and there is less money in your account, the less money the bank will be willing to lend you for your mortgage. As tempting as it is to envision furnishing a new property or parking your new car in the driveway of your dream home, hold off till you close on the property and are sure you can afford it. #4 Don’t take out or put in large amount of cash from your bank account Do not put in or take out large amounts of cash. The bank financing you will flag large deposits coming in because they may be loans from a bank or another lender. You in turn would have to pay back those loans on top of your mortgage, which would damage your loan to debt ratio. A parent or family member may have gifted you part of your down payment in which case they may need to sign a letter stating that the money was a gift and you will not be paying them back. If you did in fact have to pay them back, it would be added to your monthly debt. If you do happen to get a large sum of money from selling something like a car or if someone pays you money back that is owned, you may just have to prove it was from a legitimate source. Most lenders will look at up to 60 days worth of bank statements. It is best to get your documentation organized prior to applying for the mortgage and make sure you can account for any large withdrawals or deposits. #5 Don’t apply for more credit How much you will get to finance your house will come down to how much money you have saved and how much money you have coming in, or your capital. Any extra debt will decrease the amount you are approved for so adding anymore credit can greatly affect how much your loan will be. #6 Don’t co-sign a loan This may seem like common sense but if a friend or family member needs you to co-sign a mortgage then you might not think anything of it. But co-signing a loan can really effect your own chance of being able to get one. If they default on their mortgage then you are responsible for the payments, which in turn would affect your ability to make your own. In cases like these, it is best to protect your own financial interests. #7 Don’t finance anything Along with new home purchases comes new appliances, new furniture and maybe a new big screen TV. But financing anything when applying for a mortgage or prior to closing will do more harm than good. Stay clear of the temptation to get every last thing you need for a new home and focus on your ability to afford it in the first place. #8 Don’t switch a job, leave a job or start a company Your ability to show you are financially stable is the single biggest determinant in getting a mortgage. Quitting a job or switching jobs can aid in your potential risk to a lender that you are not in a good financial or stable position. If you are planning on applying for a new position or starting a company, it is best to do it once you have closed on the property. And of course, try not to get fired. #9 Don’t miss loan payments If you do have any loans you’re paying off, make sure you do not miss any payments. You likely haven’t missed any if you have good credit, but be extra cautious when applying for a mortgage. Sometimes they’re honest mistakes like having been away for work or on a trip for a substantial amount of time. Or maybe you were in the hospital or a family member was sick so you were not as on top of your bills. But having a 30 day missed payment can drop your credit by more than 100 points. So be sure to stay on top of your finances, especially when your credit score is crucial to your pre-approval. #10 Don’t switch banks I mean you likely don’t switch banks very often, but sometimes banks offer freebies like televisions sets or cash back when opening an account. It can be tempting, especially given the timing, but detrimental to a mortgage pre-approval. Stick with the bank you have now so you will be able to provide at least 60 days of transactions and bank account balances. It may seem minor but can make your life a lot more complicated than it needs to be if you switch your bank last minute. Conclusion The list may be longer than you expected, but you can easily avoid a number of problems by understanding what can affect your decision making and your ability to get financing when you are getting ready to purchase a new home. By getting your finances and documents in order prior to getting a pre-approval, and by getting a pre-approval prior to searching for a home, you will be well ahead of the game. And once you have the pre-approval, you will know everything not to do, so it is still effective on closing. And that’s it! Hold off on that new car, stick with the bank you’re with and stay on top of your bills. Mortgage pre-approvals can be stressful and time consuming but well worth the extra effort once you get the key to your dream home!

Purchasing a home will inevitably be the biggest financial discussion of your life. And the decision as to whether it is the right time to purchase a home depends on a number of factors. And it is not just your finances. Although your finances are important, other things you should consider before putting in an offer are your age, the current real estate and mortgage market and of course where you see yourself in the future. So should you rent or purchase a home? Find out by asking yourself the following questions. What are your future plans? In the short term, renting is always cheaper. There are substantially less costs involved in renting, and normally just comprise of first and last months, a monthly hydro bill and maybe the actual expense to move. Where if you decide to purchase a home there are a number of costs involved. Even once you are able to save the deposit you will need to save an additional amount to pay the costs of purchasing. Other costs include land transfer taxes, lawyers fees and potentially closing costs. And once you do move in, your monthly bills will likely be more than if you were renting. It is best to calculate how long you plan to stay where you are. If you plan to stay indefinitely, then purchasing is your best decision. If you plan to stay for only a few years, then renting may be substantially cheaper. There are scenarios where this may not be the case. If you are purchasing in a large metropolitan city or in the surrounding areas of one, there is a chance that the market could go up substantially in a couple years time, in which case you would have made money. But no one knows for sure what the market is going to do, so it is best to take the risk you feel most comfortable with. How old are you? If you are still in your twenties you may end up relocating due to relationships or career opportunities. In which case renting would give you more flexibility than purchasing. If you are in your thirties and are in a longer term relationship and are more established in your career, then purchasing may be a better option. As well, most people spend their twenties saving so they can purchase in their thirties. But the sooner you know where you want to live and who you want to be with, the sooner you should purchase. How much does it really cost? There are a number of fees that come with home ownership. And as we have gone over a few already, it is best to run the numbers yourself so you have a better idea of how much it would cost to purchase vs rent. Fees to purchase include saving the deposit, which is usually about 20% of the purchase price of the home. Lawyers fees, land transfer fees, closing costs if the home your purchased is new build and moving expenses including moving trucks. You will have to furnish the new home, you may need to purchase window treatments and do any needed renovations or repairs. And of course, your carrying costs. With renting you normally just pay your landlord once a month and then possibly a hydro bill and or tenant insurance. But when you own a home you will have to pay your mortgage, property taxes, maintenance fees if it is a condominium and any additional bills like hydro and insurance. You will also need to put some money away on a monthly basis to save for future repair or maintenance of the home including replacing the roof or furnace. Depending on how much you have saved to put down on the property and how much rent is in the city, you would have to run the numbers yourself to see what makes sense. But make sure you consider the amount of buying vs renting in the long run and the costs associated with each. Are you in high interest debt? If you have car loans, credit card debt or any other debt that has a high interest rate, it may make more financial sense to pay that off and then save up for the deposit for a home. Buy taking out a mortgage when you are already in a substantial amount of debt, may be putting yourself in a worst financial situation. And the likelihood of getting a mortgage or a mortgage with a good interest rate, will be lower if you already have a number of loans. Take care of the debt you are in, and then sign off on the big mortgage loan. Do you have the deposit saved? If you do not have between 10% and 20% of the purchase price of the home saved then your monthly payments will be a substantially lot more. Putting down as much as you can will keep your carrying costs lower. As well, if you do not have at least 20% saved, you will likely have to insure your mortgage which can up your monthly payments. Assess your current savings, see how long it will take you to save a deposit, and start looking once you have it saved. Another option, if you feel comfortable, is asking your parents to lend you a certain percentage towards the price and paying them back a certain amount every month, so you can sooner get into the market. Run the numbers and know what makes the most sense for you. Is your job stable? How many years have you been in your job? Do you plan to stay in the field you are in? These are the types of questions you should be asking yourself when thinking about purchasing. If you are happy in your line of work, you plan to stay in the city you are in and you are confident that your job is stable, then purchasing is likely your best bet. But if you are in a line of work that involves contract, seasonal work or if you have just started your job or would consider moving somewhere else, then you should hold off on purchasing until you are more decisive. Conclusion It may seem like the obvious choice to build equity and bank in on future appreciation, but purchasing may not always be your best option. If you are just starting out in your career, have other debts, have not saved a sufficient deposit, are not established in your line of work or might consider moving, then you might want to consider renting until you are in a more stable and confident position about the future.

When purchasing or selling a property, it is always a good idea to work with a professional, especially when it comes to the largest financial asset you own. Realtors can do everything from getting you the best price, showing you the most amount of homes, educating you on the marketing and informing you on important information regarding the contracts. So why should you work with a realtor? They will get you the best price Whether you are buying or selling a home, a realtor will likely get you the best price. When selling a home, a realtor will do a comparative market analysis, so you will know the top market value of your home and not sell for less than what it is worth. They will also be able to inform you on what upgrades need to be done and where to put your money in terms of renovations and repairs. They will help you in staging the property, have the property professionally photographed, marketed and ready to be put up for sale. This will in turn get you the most amount of buyers which will get you the highest offer. If you are purchasing a property, a realtor will be able to look at what has sold in the area, factor in any differences and come to the market value of the property you are looking at. They will also be able to go over a home inspection with you so you will know if there are any major repairs that need to be done or any deficiencies with the property. This all will make sure you do not overpay for a home because you didn’t know what to look for. They know of more properties If you are looking to purchase a home, realtors may have access to more properties than you do. They themselves or someone in their brokerage may have access to exclusive listings that are not on the market. They may also have access to properties that are about to go up for sale, so you might get access to first viewings. They will also be able to show you different areas and types of homes from resale to new build, detached to condominiums so you can explore all options. In turn, you will have access to more properties than you would doing the search alone. They can negotiate for you When it comes to negotiation, a realtor will have more leeway. They likely have negotiated many times on getting the best price for a property in the past, so will have strong negotiating skills that will work to your benefit. They will also have access to past sales in the area which will aid in their negotiation on your offer. And negotiating yourself, with no past experience and no comparable sales will not likely get you the price you want. They are knowledgeable There is a lot to know about the real estate market, from clauses to closing to taxes and lawyers and everything in between. If you do not have a qualified professional with you, you might make mistakes that could cost you a substantial amount of money in the long run. Conclusion Using a realtor is not an added service when it comes to purchasing real estate, it should be a mandatory one. When buying or selling you will want to get the best price, getting either top dollar for the home you are selling or the best price on the one you are buying. From everything to home inspections to getting the keys, a realtor will be there to answer all of your questions and make sure the process goes as smoothly as possible.