If you’re first home buyers, you probably feel daunted and out of your depth when it comes to where to start. Remember that everyone was in your position at some point and it’s very normal to feel overwhelmed. The good news is – you’re in the right place. We are here, working FOR you, to help guide you through your first home buying experience and make sure you get off on the right foot. In case you haven’t seen the other plethora of reasons why people use a mortgage broker instead of going to the bank – you can peep that here.
The most important piece of advice we can give you is to arm yourself with knowledge. Yes, there is a lot to know. But having a good mortgage broker is one way you can ensure you have someone on hand that you can contact easily with any questions as they arise.
Here’s some of the most common mistakes that First Home Buyers make and, more importantly, how you can avoid them. Because what’s better than learning from your own mistakes, is learning from someone elses right?!
1. Not Getting Pre-Approved for a Mortgage
Many first home buyers start house hunting without first understanding some really crucial things like knowing how much they can borrow, or how much deposit they need which can lead to potential disappointment if they fall in love with a property they simply can’t afford.
How to Avoid:
- Get Pre-Approved for a home loan before you start your search, get pre-approved for a mortgage to understand your budget and show sellers that you’re a serious buyer.
- Work with a Mortgage Broker: They can help you navigate the pre-approval process and find the best loan options. Again, you can read more about what makes mortgage brokers so awesome here. Book a discovery call now to see how much you can borrow.
2. Overlooking Additional Costs
Focusing only on the property purchase price and forgetting about additional costs like stamp duty, legal fees, inspections, and moving expenses can prove to be a costly mistake commonly made by first home buyers.
How to Avoid:
- Budget for Extras: Plan for all associated buying costs, including stamp duty, conveyancing fees, property inspections, insurance and potential repairs.
- Use a Cost Calculator: Utilise online calculators to estimate additional costs and include them in your financial planning.
3. Not Researching the Neighborhood
Buying a property without thoroughly researching the neighborhood, including amenities, schools, and future development plans could be a big oversight and potentially mean you are buying a property that could be devalued in the future. This will depend on your own unique situation and plans for the property. It’s good to do a simple SWOT analysis on any property that you may have shortlisted and go from there.
How to Avoid:
- Visit the Area: Spend time in the neighborhood at different times of day and week to get a feel for the area.
- Research Online: Look up local amenities, schools, crime rates, and future development plans.
4. Skipping the Building Inspection
Foregoing a professional pre-purchase building inspection to save money, potentially missing serious issues with the property.
How to Avoid:
- Always engage a qualified and reputable building inspector to assess the property for any hidden problems and review the report carefully. You may be able to use the inspection report to negotiate repairs or a better price with the seller before you make an offer or sign an offer to purchase contract.
5. Falling for Emotional Buying
We’ve all been there but it’s important not to let your emotions drive the decision entirely, which can lead to overpaying or overlooking critical issues. Try to be as practical as possible. As a first home buyer, it’s unlikely that your first property is going to be your dream home straight away, but with some time and renovations it could be, or at least a stepping stone on the way to your next home.
How to Avoid:
- Stick to Your Budget: Set a clear budget and stick to it, even if you fall in love with a property.
- Focus on Objectives: Prioritize your needs and objectives, such as location, size, and condition, rather than getting swayed by emotional appeal.
6. Ignoring Loan Terms and Conditions
Focusing solely on the interest rate and ignoring other important loan terms such as fees, penalties, and repayment flexibility. You can learn more here about other important loan terms and features.
How to Avoid:
- Understand All Terms: Review all loan terms, including fees, penalties, and the flexibility of repayment options.
- Seek Professional Advice: Seems obvious coming from us doesn’t it? But seriously, consulting with a mortgage broker to fully understand the implications of your loan terms costs you nothing, but could save you a lot.
7. Underestimating the Importance of Resale Value
Failing to consider the property’s potential resale value when making a purchase decision.
How to Avoid:
- Research Market Trends: Look into the historical and projected resale value of properties in the area. If you’re in Perth, you can use websites like REIWA to get this kind of data.
- Consult Real Estate Agents: Get advice from local real estate agents about the potential for future growth and resale value.
8. Not Reading the Fine Print
Overlooking the details in the contract or agreement, leading to unexpected surprises or issues.
How to Avoid:-
- Read Everything Thoroughly: Carefully read all documents related to the purchase, including the contract of sale and mortgage agreement.
- Hire a Conveyancer or Lawyer: Engage a professional to review documents and ensure everything is in order.
9. Failing to Negotiate
Accepting the asking price without negotiating, potentially missing out on a better deal. This will also depend on the current market conditions and property. In some markets, the chances of negotiating might be less than others. To read about the current state of the Perth property market, you can check out REIWA and realestate.com and look for stats like average days on market to give you an idea of how quickly properties are selling. But hey, if you don’t ask you dont get, so it’s always worth asking the question to the real estate agent before you make your official offer.
How to Avoid:
- Negotiate Confidently: Don’t be afraid to negotiate the price or ask for concessions, such as repairs or additional inclusions.
- Research Comparable Sales: Use information on similar properties to support your negotiation strategy.
10. Overextending Financially
Stretching your budget too thin to afford a more expensive property, leading to financial strain.
How to Avoid:
Generally the lender will build in a buffer to your borrowing capacity but it pays to understand the numbers for yourself and:
- Stay Within Your Means: Set a realistic budget and stick to it, taking into account all expenses and potential future changes in income or costs.
- Plan for Emergencies: Ensure you have a financial cushion for unexpected expenses or changes in circumstances.
11. Ignoring Future Needs
Choosing a property that doesn’t meet long-term needs or considering future lifestyle changes. While your first home is unlikely to be your last property purchase, you want to make a plan for how long you intend to keep the home and how your needs might change during that time. For example, you might be looking at a one bedroom apartment, but perhaps starting a family is also on the horizon, in which case you would possibly need to consider a larger home with some more space.
How to Avoid:
- Think Long-Term: Consider your future needs, such as family size, work location, and lifestyle changes.
- Choose a Versatile Property: Opt for a property that can adapt to future changes, like adding more rooms or having space for a growing family.
By being aware of these common mistakes and taking proactive steps to avoid them, first home buyers can make more informed decisions, reduce stress, and increase their chances of a successful home buying experience.
If you’d like to book in for a discovery call or to get started with your home loan pre-approval, contact me today.
All lending subject to status and lenders criteria. Terms & conditions apply. This document contains general information only. Your own personal circumstances have not been considered and you should seek independent financial advice prior to making any decision on a financial product.
