As Millennials find their financial footing, some are looking to buy a first home, in many cases later than their parents or grandparents did. (This is not entirely due to real estate costs, as this Financial Post analysis shows, but may also result from a desire for greater mobility and more emphasis on experiences over ownership. South of the border, Bloomberg reports that high rents across the United States are expected to give twenty and thirtysomethings the push they need to buy.)
Lavarate’s Atrina Kouroshnia was recently quoted in a Financial Post article on the seven real estate mistakes Millennials make when buying real estate, and it’s certainly worth a read if you’re in the market for a home. Most of these mistakes relate to mortgages (for instance, putting all your money into a down payment and failing to consider rate risk), which underscores the importance of working with a mortgage professional you trust rather than relying on your bank to get you the best rate.
A few other mortgage mistakes that weren’t included in the piece:
- Disregarding the penalty or the fine print to get out of the mortgage. A lender might have a collateral charge which would make it difficult for the buyer to switch out, even at renewal. Kouroshnia recommends seeing what long-term flexibility your mortgage has and really weighing out the differences. Many young couples do not think about the possibility of breaking their mortgage, but a job change or a new addition to the family may necessitate an unanticipated move. Portability may not always be an option if the homeowners decide to rent or can’t find the right home. Don’t just focus on a low rate or cash back incentive offered by the lender; also consider any penalties for breaking that mortgage.
- Over utilizing credit or changing jobs prior to closing. Even if a mortgage is approved, a major change in employment, credit score or credit utilization could jeopardize the mortgage, because a lender can withdraw their approval if there is a drastic change that gives them pause. Kouroshnia encourages homebuyers to avoid any major changes or large purchases until after their mortgage is funded. With any major lifestyle change it’s important to focus on affordability and give yourself time to settle into the transition. Otherwise, you could find that you’re in over your head.