Not applying for pre-approval
Before you start looking for your first home, take the time to apply for a pre-approval. Different banks have varying policies, so the amount you can borrow might change depending on the lender you choose. Speak to a good mortgage broker about your borrowing capacity and submit your pre-approval application. When you have a pre-approval behind you, you’re able to shop with confidence knowing exactly how much you have to spend.
Borrowing too much money
Many banks may tell you that your borrowing capacity is much higher than you expected. This leads many first home buyers to increase the amount of money they think they can spend buying a home, which often tempts them to borrow right up to their borrowing limit.
If interest rates rise, you risk facing higher repayments than you can afford. You also risk being stuck with payments that are higher than you originally budgeted for. Rather than trying to spend up to your borrowing limit, take the time to work out your monthly payments and stick to what you can comfortably afford each month without stretching your budget too far.
Not knowing your mortgage options
While you might have a pre-approval for a mortgage, it’s equally important to know what type of home loan will suit your needs. Once again, different banks will have varying policies for the amount of deposit you need. They may also offer different interest rates and terms. Understand whether you want to choose a fixed or variable interest rate to suit your budget.
Not understanding buying costs
You might have spent a considerable amount of time saving for the deposit on your home, but have you also factored in the additional costs associated with purchasing property?
It’s common for many first home buyers to underestimate how much they need to pay in added costs.
Take the time to work out how much you’re expected to pay for things like:
- Stamp duty
- Mortgage registration
- Conveyancing fees
Discuss any extra costs you might incur with your mortgage broker and check whether you qualify for the first home owner’s grant to help you cover them all.
Underestimating the costs of owning a home
Buying your first home can be a great investment, especially if you view it as saving money paying rent and paying off your landlord’s mortgage. However, it can be easy to underestimate the costs of owning your own home.
You might have taken into account your home loan repayments, but don’t forget to budget for added costs, including:
- Home insurance premiums
- Council rates
- Water rates
- Repairs and maintenance
Not doing your homework
Many first home buyers purchase properties based purely on the price. However, just because a property seems cheap doesn’t necessarily mean you’re buying it at a good price, especially if similar properties in the same area are selling for much lower prices. Take the time to do some homework and understand what other properties are selling for in the areas you’re interested in.
If you’re buying at auction, you’ll reduce the risk of paying too much money. However, if you’re buying through a private treaty, you’re in a stronger position to know if you’re submitting a realistic offer or not.
Not getting an inspection
Most first home buyers understand that the properties they buy are likely to need a bit of maintenance. However, no matter how small or insignificant little repair jobs or maintenance issues might seem, there could be major structural problems hiding under the surface that are easy to overlook on inspection day.
If you’ve found a home you’re thinking of buying, take the time to engage a building inspector. What you discover on your inspection report could potentially save you thousands of dollars after you move in.
Before you buy your first home, take the time to call us on 1300 832 554. We can help you avoid some of the common first home buyer mistakes.
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Disclaimer: We recommend that you seek independent financial and taxation advice before acting on any information in our articles and newsletters. They contain general information only and have been prepared without taking into account your personal objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. Interest rates are subject to change without notice. Lenders terms, conditions, fees & charges apply.