Three common mistakes first-time homebuyers make are: 1) Not taking advantage of incentives like Ontario's First-Time Home Buyer Incentive which provides up to 10% off a mortgage; 2) Not managing existing debt which impacts mortgage approval; 3) Not budgeting for down payments and related fees, with less than 20% down requiring default insurance. Resources exist to help first-time buyers navigate the process successfully with careful financial planning and building trust with lenders.

1. Three Mistakes First-Time Homebuyers Make
Up until recently, the housing market in Toronto had been accelerating at a red-hot
pace. Not even the economic disruptions of the COVID-19 pandemic had succeeded in
moderating the increase, or bringing prices down to affordable levels.
But the new reality of high inflation and rising interest rates promises to cool the housing
market in 2022. So far, this is not the bursting of a housing bubble that some observers
have long predicted. The average home price is still up 9 percent from last year.
Although higher mortgage rates are a disincentive for many, some intrepid buyers have
been enticed into the market by the modest dip in prices in some regions.
Here are three mistakes that potential buyers often make, especially first-time buyers:
1. Not making use of Ontario’s First-Time Home Buyer Incentive
First-time home buyers may not be aware of how many government and private sector
resources they have at their disposal. The First-Time Home Buyer Incentive is a shared-
equity mortgage with the government of Canada, which helps reduce a monthly
mortgage payment. The program offers up to 10 percent off the mortgage of a newly
constructed home and 5 percent for a resold home or mobile/manufactured home.
This shared equity means the government also shares in the property value, up to 8
percent per annum (not compounded) on the incentive amount from date of advance to
time of repayment. It’s an incredibly useful tool for those finally settling down but
perhaps lacking the funds to secure the house of their dreams.
2. Not dealing with already existing debt
One can’t highlight enough just how important debt management is in procuring an
affordable mortgage. The amount of debt carried by a first-time home buyer is an
important variable considered by banks and lenders in determining whether buyers will
be approved for a mortgage. A good credit score is also key; the higher the score, the
better the rate will be.
3. Not budgeting for the down payment
First-time home buyers may be aware of the mortgage aspect of buying a property, but
some may not consider related fees and costs. A down payment is an essential part of
the home buying process that is usually calculated as a percentage of the total price of
the house. It’s important to note that if one’s down payment is less than 20 percent of
the total home cost, a lender will require default insurance. This is meant to protect the
bank in the case of default and foreclosure. A substantial down payment, like the high
credit score and lack of debt, gives the money lender confidence in the home buyer.

2. In conclusion, while there are many mistakes that a home buyer can make, there are
also resources out there and people willing to help enthusiastically. The most important
factor is trust. If a bank can trust the home buyer, the prospective buyer will secure a
mortgage, and be one step closer to the dream of home ownership.