Buying your first home is an exciting prospect, but the process itself can be daunting. First home buyers need to understand that buying a home, and taking on a mortgage, is a huge commitment, and mistakes can be costly.
If you feel you are approaching the time when you will be ready to purchase your first home, be prepared to take your time and do your homework in order to avoid the following common first home buyer mistakes.
1. 1: Not getting pre-approval for a home loan
Before you even start looking at potential properties you need to know exactly how much you are able to borrow. Go to several lenders or mortgage brokers to find out how much you can borrow so you know the upper limit property price you can afford. Make sure you get pre-approval from a lender for a home loan before you put in any offers on a property so you know exactly where you stand.
Having your finance pre-approved also puts you in a stronger position when you place an offer on a property. If you place an offer 'pending finance' someone else who has their finance pre-approved could beat you to the punch.
With so many properties going to auction these days, you also need to be aware that you will be unable to bid at an auction unless you have your finance pre-approved. You need to be ready to exchange contracts and pay the deposit on the day if you make the winning bid.
2. 2: Not preparing before applying for a home loan
Well before you apply for a home loan you need to get your financial house in order. Check your credit rating to ensure you don't have a negative listing that could prevent you getting a loan approved. Pay down credit cards and personal loans as much as possible. Make sure your tax returns are up to date. The lower the risk you present to a lender, the more likely your loan approval will proceed smoothly.
3. 3: Not accounting for additional expenses
Saving for your deposit is a big achievement, but you're not there yet. On top of the deposit you will need additional funds for building and pest inspections, stamp duty, home and contents insurance, legal fees for conveyancing and moving costs.
Make sure you have carefully researched and added up all these additional costs and that you have them covered before you approach a lender for a home loan.
4. 4: Not researching your home loan options
Home loans come in a variety of forms. Make sure you know what these are and which options are best for your circumstances. Would fixed rate or variable interest be best? Would you benefit from features such as a redraw facility or an offset account?
5. 5: Not doing your independent research
Do as much research as possible into property values in the areas you are looking in to ensure you don't overpay for a property and, obversely, that you can spot a bargain, or at least the home that offers the most value for money, straight away.
It's easy to do this online by looking up recently sold properties on the major real estate listing sites.
6. 6: Not keeping a cool head
If you've done your independent research into property values, you will also be able to look at each property you view with a critical eye rather than a purely emotional response. When you find a property that offers good value in the current market, suits your budget and is likely to prove a good investment over time you will be ready to pounce – just don't show your excitement to the selling agent. Keep your cool and hold your nerve throughout the whole negotiation process and be sure to set yourself an upper limit for what you are willing to pay for the home.
If you are not sure that you can make an informed decision on buying a property yourself, consider engaging the services of a buyer's agent. Buyer's agents specialise in locating and evaluating properties and can negotiate the purchase on your behalf.
If you prepare carefully and heed these mistakes to avoid, buying your first home might take longer but you will be in a stronger position in the long term. Don't be among the first home buyers who rush in too soon, don't do their due diligence and end up over-stretched and over-stressed.
To avoid making a costly first home buyer mistake, speak to your local Century 21 agent today.