- Posted 18 Jan
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You’re excited about buying your first home. You’ve been planning and saving for a long time now and the time has finally come to make that first step in buying your first home — looking at open homes!
But, as you get caught up in all the excitement of house hunting, it can be easy to forget to dot the ‘I’s’ and cross the ‘T’s’.
If you want to ensure that your first home is one that isn’t going to cause you headaches down the track, make sure you’re aware of the following common mistakes first home buyers tend to make.
#1: Forgetting to get pre-approved finance
You might think you’ve done your due diligence on this one, but unless you’ve got something in writing from a lender about how much finance you’ve got available to you, then it’s just empty words.
You might know how much you qualify for in terms of your mortgage, but you need to make sure that you’re actually going to be able to get finance.
This will also allow you to fully focus on the houses you can actually afford, rather than wasting your time on those that are out of your financial capabilities.
Get pre-approval BEFORE you start going to open homes.
#2: Not investigating mortgage options
While it’s a lot easier to get a home loan today, it’s also a lot riskier and can be more expensive if you haven’t shopped around first.
Understanding what each mortgage provides you in terms of options and functionality is important to your overall comfort and lifestyle.
What’s the point in owning your own home if you can’t put food on the table?!
Make sure you shop around and get advice on a number of different lenders before you sign on the dotted line. Understand what each mortgage offers you and make an informed decision.
#3: Borrowing more than you can easily afford
Just because you’re lender pre-approves you for a certain amount, doesn’t mean that you should borrow to that limit. Avoid stretching your finances when it comes to your home loan, because if something happens, like one of you loses your job, it can make life very difficult.
Know what your limits are and allow a 20% buffer so that if you need to make changes to the house, get something fixed or deal with unforeseen financial problems, you’re not faced with losing the house because you can’t pay your mortgage.
#4: Being lazy
As a first home buyer, you might be relying completely on your local real estate agencies for their expertise, thinking that they have your best interests in mind and that they’ll do all they can to help you.
This is a major mistake. You need to be proactive in your search and complete your own independent research to understand the areas you’re looking at and what recent auction and sale results have been.
By having this information upfront, you’re better positioned to make realistic counter-offers on the houses you’re interested in.
There is absolutely no reason to sit on your laurels and wait for the right house to be presented to you. Get amongst it and do your own research.
#5: Failing to get a pre-purchase inspection report
As a first home buyer, some of the best deals available to you might involve older homes that need some renovations.
Before you jump into what might look like a great deal, make sure you have an inspection completed on the property. Sure it might cost you more money to get this done, but it will save you thousands in unforeseen building repairs.
#6: Not being aware of additional costs
When you’re just starting out in the property investment scene, you might think that the only costs you have to worry about are those of your mortgage and insurance payments.
But there are quite a number of additional costs that you should be aware of, such as:
- Inspection reports
- Costs associated with moving
- Stamp duty
- Transfer fees
- Council rates
- Lawyer fees
If you don’t allow for these fees, you might find that you don’t have enough funds available to complete the purchase of your home. Don’t make this fatal mistake, ask questions and make sure you’re aware of costs upfront.
#7: Letting your emotions run the show
It’s exciting buying your first home. There are so many things to think about and you know exactly what you’re looking for… but it can be easy to allow those emotions to take over and blind you from things you should be looking for.
Don’t forget to think about what your return on investment (ROI) will be. This will be different for each person, but you need to take into account how long you plan to spend in this home and what plans you have for the future.
If you’re only looking at staying in this place for a couple of years, then it doesn’t make sense to buy a home that needs a ton of repairs done to it. Calculate your ROI on each house before you sign on the dotted line.
Now that you’re equipped with this information, you can avoid making these mistakes and step out into the real estate world with confidence — knowing that you want fall prey to these common first home buyer mistakes!
Need some help with your home loan finance? Not sure what options are available to you? Contact the team at Australian Credit and Finance today to discuss your options.