How to Avoid the Top 10 Mistakes First-Time Home Buyers Make

Often the excitement of buying your first home can get in the way of common sense. In fact, many first-time buyer rookie mistakes cost money and lead to disappointment. Buying your first home is one of the biggest milestones of your life and venturing into a major investment takes some caution. To make sure it remains a positive experience and that you get the ideal home for your needs, here’s how you can avoid the top 10 mistakes that first-time home buyers are more likely to make.

1. Skipping Mortgage Pre-approval

While it’s tempting to start looking at properties right away, getting pre-qualified for a mortgage is a smarter first step. Knowing how much house you can afford can help avoid disappointment in the long run and help streamline the search for your real estate agent and for yourself. You can apply for mortgage pre-approval and know before you get your hopes up whether you qualify or not. When you take the pre-approval route you will not only find out if you pass the mortgage stress test set out by the government, but more importantly you will have a better idea of what homes will be in your price range. The stress test requires you to qualify for a higher interest rate than what the lender offers you. Your real estate agent can then show you the ideal home choices within your budget.

2. Missing Out on First-Time Home Buyer Programs

The government offers incentives to make it easier for first-time buyers to afford a home. If you don’t look into your options, you could miss out on financial support not available the second time around. The available programs for first-time buyers are:

First-Time Home Buyer Incentive

This shared equity plan provides funds to help with your down payment. The government offers 5 to 10% towards your purchase, and then shares in the equity equal to their contribution at the time you sell, or your mortgage matures.

Home Buyers' Amount

This amount represents a $5,000 non-refundable income tax credit for up to $750 in federal tax relief.

Home Buyers' Plan

You can access up to $35,000 in a calendar year from your registered retirement savings plans (RRSPs) to put towards your down payment.

GST/HST New Housing Rebate

The rebate applies strictly to new builds and allows you to recover part of the GST or HST on the cost of the build or purchase price.

Your real estate agent can provide you with more information, as can your lender.

3. Not hiring a real estate agent

Online research can make first-time buyers overly confident they don’t need the assistance of a buyers’ agent. However, real estate agents do more than help you find a home. They are there to protect your best interests and ensure you understand the process. They represent you during negotiations and provide valuable insight during the house hunting process. They know the neighbourhoods to keep you safe, fair prices for homes and also help calm emotions that can lead to bad decisions. In other words, they’ve got your back.

4. Putting Your Entire Savings Towards A Down Payment

When you put all your savings towards the down payment for your home, you could find yourself quickly falling into financial trouble. Buying a home has many costs beyond your mortgage including closing costs, property tax, utilities and insurance. You can read our blog on all the unanticipated costs here. These financial “growing pains” need to be accounted for when determining if you can afford your mortgage. Using an affordability calculator can help you get a better picture of your costs. You can then plan to put aside additional savings for an emergency fund.

5. Emotional Purchases

It is very easy to become too emotional during the buying process which can lead to bad decisions. The only way to avoid emotional purchases is to listen to your real estate agent. Your agent remains the voice of reason and will help steer you in the right direction when emotions run high.

6. Overpaying for a home

Often being overly zealous about a property can lead to putting in an offer that is unrealistic. Overpaying is even more common in markets like Toronto where inventories are low, and competition is fierce. While bidding wars are common in this type of market, first-time home buyers need to listen to their agents to avoid overpaying. Your agent knows a home’s worth and will make sure you never overpay. They can review the competitive market analysis that will show you what other homes have recently sold for in the area to help keep you grounded during the offer process.

7. Not Getting Home Inspection

In the case of bidding wars or a home that seems to have a price too good to be true, buyers often opt to skip the home inspection. This is never a good idea even if you have savings to cover repairs. Hidden damage can be far more expensive than you think, and even worse can put you at risk. Things like black mold or faulty wiring can lead to serious issues, therefore a home inspection is a must.

8. Underestimating Repair and Renovation Costs

If the house hunt has become tedious and you aren’t finding what you want (a very real possibility in a market with low inventory) it might be tempting to overlook minor repairs or decide to buy a home that requires some major upgrades. However, it can be very easy to underestimate these costs. To be safe, ask your real estate agent to request not only a home inspection, but also the chance to get some estimates on repairs and upgrades to get a better idea of the cost.

9. Credit Seeking

Although you might have pre-approval for your mortgage there is one thing most first-time buyers don’t realize: Right up until closing, your lender might decide to do one last credit check. If anything has changed with your financial status it could put your financing at risk. The biggest mistake you can make is to start applying for credit after pre-approval. The time up until you close the deal is a critical stage when applying for credit can negatively impact your credit score. If you get approved for new credit, or even start using your existing credit, you can increase your debt to income ratio. This could put your mortgage at risk. To avoid mortgage issue, don’t start spending money on credit until you’ve lived in your new home for a while and get a better idea of your expenses.

10. Not Considering Resale Value

First-time buyers are so intent on buying a home, they often overlook the important elephant in the room: Resale value. Resale value is the price you get when you decide to sell. While this might seem too far away in the future to worry about, you never know what life changes and opportunities might come along that see you selling your home sooner than planned.

While the location of the home is a major factor in resale value, other considerations include:

  • Number of bedrooms and bathrooms in relation to other homes in the area

  • Amenities

  • Transportation

  • Parking/garage

  • Schools

In some cases, you might get lucky and purchase a home in an up and coming neighbourhood which can greatly improve resale value. In other cases you might choose an area facing challenges such as higher risk for floods (a growing concern in the GTA), poor quality schools (not as important in high density areas with smaller condos) or an area that has fallen out of grace due to factors like crime. If you don’t consider these benefits and challenges, you could find when it comes time to sell, you don’t get as much as you have hoped.

These top 10 tips will help you avoid common rookie mistakes that can lead to disaster. If you are a first-time home buyer in need of a professional assistance, the real estate team at can help. Reach out to our team today.


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