As a first home buyer, it’s crucial to understand the process of buying a home, what you need to prepare for, and what pitfalls to avoid. That’s why we have created this guide to help you navigate the often complex and overwhelming world of property.
We understand the importance of getting it right the first time, and that’s why we’ve compiled a list of the most common mistakes made by other first home buyers. By learning from the experiences of others, you can avoid these pitfalls and set yourself up for a successful homeownership journey.
Why Knowing Your Budget and Borrowing Capacity Matters
Determining your borrowing capacity is a crucial step in the process of applying for a home loan. Knowing your borrowing capacity will help you understand how much you can afford to borrow, and what your repayments are likely to be, so you can choose the right property for your circumstances and goals.
To determine your borrowing capacity, you can use online calculators like the one offered by RateCity. Their calculator takes into account your income, expenses, and other financial obligations to provide you with an estimate of how much you could potentially borrow. Using a reliable tool like this can help you make more informed decisions when it comes to your home loan application, and avoid any potential financial pitfalls down the line.
Why Skipping Pre-Approval Could Cost You
Skipping pre-approval when applying for a home loan can be a costly mistake for several reasons. Firstly, pre-approval gives you a clear understanding of how much you can afford to borrow and what your loan repayments are likely to be. Without this information, you risk finding the perfect property only to discover later that you are unable to secure the necessary finance.
Secondly, pre-approval provides you with a bargaining chip when it comes to negotiating with real estate agents and sellers. Being pre-approved for a home loan gives you an advantage in a competitive housing market and can help you secure the property you want at a better price. Finally, if you skip pre-approval and go straight to the loan application process, you risk being rejected by the lender, which can leave a negative mark on your credit score. This can make it harder to secure finance in the future and may limit your borrowing options. So, make sure to get pre-approved before you start your home search to save time, money, and hassle..
The Risks Of Not Conducting Proper Research
Conducting proper research before buying a home is crucial to make an informed decision. It helps you avoid buying a property in a location that doesn’t suit your lifestyle or missing out on better deals. Additionally, thorough research can help identify any hidden problems with the property before committing to the purchase. Proper research involves looking at different areas, neighbourhoods, and house types to understand what suits your needs and budget.
Additionally, researching the property’s history, such as any previous sales, renovations or damages, can help you gauge its true worth and potential for future appreciation.
The Downside Of Insufficient Deposit Savings
When purchasing a home, it’s essential to have enough savings for a deposit. A deposit is the upfront payment required by lenders to secure a home loan. Typically, lenders require a minimum of 5% to 20% of the property’s purchase price as a deposit. Not having enough deposit can result in paying higher interest rates, which can lead to higher monthly payments.
Additionally, if the deposit is less than 20%, lenders may require you to pay mortgage insurance, which can add a significant cost to your mortgage. In some cases, not having enough deposit can also result in being declined for a loan altogether. As a first-home buyer, it’s crucial to save enough deposit before considering buying a property.
Getting Emotionally Involved With The Purchase
Buying a home is a significant life event that can trigger strong emotions such as excitement, happiness, and even anxiety. These emotions can cloud your judgement and lead to impulsive decisions that may have long-term financial consequences. For example, falling in love with a property that is outside of your budget can lead to overstretching yourself financially or not having enough money for other important expenses. Similarly, if you let your emotions guide you towards a home that does not suit your long-term needs, you may find yourself regretting the decision down the line.
To avoid making decisions based solely on emotions, it is essential to keep a clear head and consider your budget and long-term plans. Additionally, you should have a clear understanding of your budget and future financial goals to ensure that the property you are considering aligns with your long-term plans.
Not Weighing Up Total Costs Of Homeownership
The costs of owning a home go beyond the initial purchase price. First home buyers often overlook additional costs associated with homeownership, such as property maintenance, rates, and insurance. Failing to consider these costs can result in financial strain or even foreclosure. It’s important to consider these costs when making your budget and deciding how much you can afford to spend on a property.
Limiting Your Conversations To One Lender
First home buyers may be tempted to go with the first lender they come across, but shopping around for lenders is essential when looking for a mortgage. Not doing so can lead to missing out on better deals or being stuck with a lender that doesn’t suit your needs. It’s important to research and compare different lenders and their mortgage products before making a decision. Reduce Home Loans has one purpose – to provide our customers with the lowest interest rates possible and help them find loans that meet their needs.
Not Considering Future Needs
Many first home buyers often forget to consider their future needs, such as the possibility of starting a family or needing to work from home. Failing to consider these needs can result in outgrowing the property quickly and needing to sell sooner than expected.
Skipping Pest and Building Inspections
Skipping pest and building inspections is a common mistake for homebuyers because it can lead to costly issues down the line. Inspections are essential for identifying any potential problems with the property, including structural issues, pest infestations, and other hidden problems that may not be visible to the naked eye. By skipping these inspections, homebuyers run the risk of purchasing a property that may require significant repairs or even be unsafe to inhabit.
Another reason why homebuyers may skip inspections is that they want to avoid the additional costs. While inspections do come with a price tag, they are a necessary expense that can save you money in the long run. If an issue is identified during an inspection, you may be able to negotiate a lower purchase price or require the seller to make repairs before closing the deal. This can save you thousands of dollars in repair costs and ensure that you are purchasing a property that is safe and structurally sound.
Not Looking For The Best Home Loan
Reduce Home Loans is known for providing some of the lowest home loan interest rates in Australia, making it a popular choice for homebuyers looking to save money on their mortgage. By not doing your research and comparing lenders, you may be overpaying on your home loan and missing out on potential savings. With so many lenders and loan products available, it can be overwhelming to navigate the market and find the best deal. However, by taking the time to compare rates and features, you can find a loan product that suits your needs and budget.
At Reduce Home Loans, customers have access to a range of home loan products, including variable rate, fixed rate, and split rate loans. They also offer a range of features, such as offset accounts, redraw facilities, and the ability to make extra repayments. Doing your research and comparing lenders is essential for finding the best home loan for your needs and budget.
Buying a first home can be a daunting experience, but by avoiding these common mistakes, you can make the process easier and more rewarding. Take the time to do your research, understand your budget and borrowing capacity, and seek professional advice to ensure you make an informed decision. By doing so, you can start your homeownership journey with confidence and peace of mind.
Getting Ready To Buy Your First Home
If you’re in the market for a new home loan or looking to refinance your existing loan, contact the team at Reduce Home Loans. They have a team of experienced mortgage brokers who can help you navigate the market, find the best loan product for your needs, and potentially save you thousands of dollars over the life of your loan. With a commitment to providing customers with some of the lowest interest rates in Australia and a range of loan products and features, Reduce Home Loans is the perfect partner for your home buying journey.
Any statements are general in nature and do not take into account your financial personal situation, objectives or needs. You should consider whether any statement/s is suitable for you and your personal circumstances. Before making any financial decision, consider your circumstances and the product disclosure statement.