Whether it’s a new apartment or an old one – or even a house in the outer suburbs – finding an affordable home isn’t easy for anyone starting out. And in all the excitement of going house hunting, it’s all too easy to make mistakes. The following are seven of the most common mistakes first-home buyers make.
1. Not getting pre-approval
Just knowing you qualify for a home loan is not enough. Before you start looking at properties, go to lenders and find out how much they are willing to lend you. This will help you focus your attention on houses you can afford, so you can avoid the disappointment of finding your dream home and then learning you can’t have it.
2. Not understanding your mortgage options
Getting a home loan is much easier today than it was in the past, when you had to save for years for your deposit money. It may be easier, but it’s also riskier and can be more expensive. A no-deposit home loan comes with the added cost of mortgage insurance. Would you be better off making a deposit and saving on the ongoing cost of mortgage insurance? Get advice from a variety of lenders and discuss all your options with them.
3. Borrowing too much
Many first-home buyers make the sometimes fatal mistake of borrowing to their limit. This can stretch your finances to the limit and will not allow you to make improvements to your property when you move in; worse still, you might not be able to afford to enjoy life in your new home. If you face unforeseen financial problems, it could mean having to sell your house before you have substantial equity in it.
4. Not being proactive
Too many first-home buyers rely solely on the expertise of their local real estate agencies. You should take a proactive approach and do independent research. You can easily find auction results in your local paper and online. Narrow your searches down to the suburbs and even streets where you want to buy and you can find out what properties are selling for. When a vendor’s agent, who will always be acting on their client’s behalf, gives you a price, you will be in a position to make a realistic counter-offer. If you buy at auction, you will avoid paying too much.
5. Not getting a pre-purchase inspection report
Some of the best real estate deals are older homes that need minor or cosmetic repairs and renovations. Some of the worst deals are older homes that need costly major repairs. Those major repair jobs are usually hidden from view. Saving a few dollars by not getting a pre-purchase inspection report from an independent building inspector can cost you thousands of dollars after you move into your home. To be on the safe side, have a pest inspection carried out as well.
6. Underestimating additional costs
When you buy a home, you pay more than just the cost of the house. Some of the additional costs include:
Underestimating or not estimating these and other costs is a fatal mistake many first-home buyers make. Know your costs and budget ahead of time and you won’t be losing sleep when you move into your new home.
7. Getting too emotional
Buying your first home is an emotional experience, so it’s too easy to let your emotions blind you. Take your cue from professional home renovators, who think of only one thing when they buy a house: “What will my ROI be?” If a professional doesn’t think a house offers a good return on their investment, they walk away. So should you.
If you try to keep a cool head and avoid making the common mistakes, it may take longer to find your first home, but it will be worth it. You will have built your future on a foundation that is a firm as the foundations of a well-built house.