Buying a house is a process where you’re invested both financially and emotionally, but you need to make rational decisions. As a first time home buyer, you might be poorly prepared to make those decisions, leading to mistakes.
Home buying mistakes can be pretty costly. That’s why you need to know precisely what not to do when buying a house.
Fortunately, we’ve compiled a list of errors homebuyers make so you can avoid them. Let’s look at 10 common home-buying mistakes – and how to buy a house the right way:
- 1. Not Being Properly Prepared: Get Pre-approval
- 2. Not Choosing The Right Mortgage: We Can Help
- 3. Not Using A Buyer’s Agent
- 4. Not Organising A Proper Building Inspection: Get A Professional’s Help
- 5. Not Setting Aside A Budget For The Extra Costs Associated With Buying A Home
- 6. Taking Unnecessary Loans Prior To Seeking The Mortgage
- 7. Not Negotiating The Terms Included On The Contract of Sales: Get a Conveyancer’s Help
- 8. Job Hopping
- 9. Buying Property in Desperation: Be Patient
- 10. Going Solo: Use A Team of Experts
10 Common House-buying Mistakes First Home Buyers Make:
1. Not Being Properly Prepared: Get Pre-approval
People can avoid a lot of mistakes by researching properly and preparing themselves to buy a house. Here’s how you can do that:
Research Your Neighbourhood
Not only do you need to research house valuations, you also need to investigate the neighbourhood where you want to buy.
When you’re buying a house, you’re uprooting your life and planting it in a new place. That’s why you need to check if the neighbourhood is the right fit for you.
See if it’s secure by researching its crime rate. Consider your commute to and from work. Look into the routes and availability of transport services you may need. Also check for the availability of other services, such as hospitals, grocery stores, restaurants, and theatres. If you have children or are planning to have kids, look into the quality of schools. This is one of the main concerns many people have when they’re looking to move.
Always remember: a house is an investment. That’s why you need to study the area’s sales history and potential for value growth.
There are more casual ways to research a neighbourhood as well. You can go for a stroll and strike up conversations with the locals. If they’re very helpful, that’s a good sign. Check for ‘For Sale’ signs as well. If you find many of those, it might indicate that the neighbourhood is struggling.
Pre-approval for a loan is a critical part of being prepared to buy. If you make the mistake of putting down a deposit or signing a contract of sale before getting pre-approved, you risk losing your deposit if you fail to get a loan approved before settlement.
Analyse your finances: Check your credit report, know your credit score (here’s how you can do it for free) and evaluate your liability, assets and debt-to-income ratio. More importantly, get pre-approval from a lender if you don’t want to miss out on your dream home.
Stay Within Your Budget
Also prepare by setting your budget – then stick to it. That doesn’t mean settling for a cheap, inadequate property. The right property is one that you love for a price you can afford.
2. Not Choosing The Right Mortgage
First home buyers often look at only the interest rate when deciding which home loan to take out. But there is much more to consider when determining which loan is right for you.
There are many different types of loans, you need to decide which one best suits you situation. For example, should you choose a fixed or variable interest rate? Principal and interest payments or interest-only loans? Redraw or Offset? How long a mortgage term best suits you?
Choosing the right home loan can be a complex process. If you need help with it all, contact Home Loan Experts. You can enquire online or call us at 1300 889 743.
3. Not Using A Buyer’s Agent
Although real-estate agents are legally obligated to act ethically towards the seller and the buyer, ultimately their job is to sell the property for the owner. If you’re on your own, you can easily find yourself in a less-than-favourable position. To improve your chances, you need to use a buyer’s agent.
A buyer’s agent represents you, the buyer. And not just in negotiations. Their job is to help you with all aspects of buying a house, from finding properties you like to signing the contract. For more on why you should use a buyer’s agent, read about them here.
4. Not Organising A Proper Building Inspection: Get A Professional’s Help
You need to know as much as possible about any property you’re trying to buy.
A property inspection checks for defects, pest infestations and more. It provides an accurate overview of the property. Read here for more reasons why you should run a proper building inspection.
Hiring a professional to do the job is highly recommended. However, you can use this building inspection checklist to get an idea of everything the inspection should cover.
Most people underestimate the cost of a proper building inspection. They are a substantial expense. But they can easily pay for themselves with what they can detect to allow you to make an informed decision.
5. Not Budgeting For The Extra Costs Associated With Buying A Home
Home hunters can easily underestimate the total cost of buying a home. Throughout the buying process, you will need to pay additional costs, such as stamp duty, valuation costs, loan application fees, conveyancing fees and Lenders Mortgage Insurance.
Once you move in, there will be other expenses, such as council rates, utility bills, contents and building insurance, and strata fees.
Be aware of all of the expenses you’ll have to cover and budget accordingly.
6. Taking Out Other Loans Prior To Seeking The Mortgage
Banks evaluate your credit report; your debt-to-income ratio and various other things to determine whether you can pay back the loan.
Just seeking credit puts an enquiry on your credit report. Credit enquiries are a record left on your credit file showing that you applied for credit.Too many enquiries can hurt your credit score, putting your home loan application at risk.
How Long Should You Avoid Seeking Credit Before You Apply For The Mortgage?
The major lenders prefer if you have only one or two enquiries in the last six months. But there are some lenders that are more strict and will ask for explanations for all the enquiries that you have made in the past two years.
So, if you take on a hefty debt, such as a car loan, during those timeframes, your application might get rejected, as lenders might consider a deal with you too risky.
7. Not Negotiating The Terms Included On The Contract of Sale: Get a Conveyancer’s Help
Buying a home means entering into a legally binding contract. Avoid making the mistake of going solo and signing the contract without having an expert look it over first. A conveyancer is a legal professional who specialises in settlement law. Hire one to look over your contract of sale, to make sure you’re signing exactly what you think you are and that everything is in order.
Here’s a list of our recommended conveyancers and more information on why you need one.
8. Job Hopping
As mentioned before, you need to show lenders that you can make regular mortgage repayments. You may find it harder to get your loan approved if you have a history of changing jobs frequently.
9. Buying Property in Desperation
Be patient. Finding the right property can be difficult. You have to locate one that matches your budget and your lifestyle.
It might take longer than you anticipate. That is why some people make a decision to purchase out of desperation. Take your time and be rational. A rash decision can lead to overpaying or otherwise getting a bad deal – or even buyer’s remorse.
10. Going Solo
As a first time home buyer, you’re probably making the biggest purchase of your life. That is why you need the help of professionals.
Specifically, you need five people on your team: the mortgage broker, the lender, the conveyancer, the buyer’s agent and the building inspector.
Home Loan Experts can make sure you have this team at your disposal and help even first home buyers avoid the pitfalls of the home buying journey like a pro. You can get a free assessment by enquiring online or calling Home Loan Experts at 1300 889 743.
To make your first home purchase the right home purchase, enrol in our free online Home Buyers Course. Among many things, you’ll learn how to maximise your borrowing power, get the best deal on your home loan and make an offer that vendors will accept.
We recommend that you seek independent financial advice before borrowing money to invest.