Buying your first home can be a nerve-wracking and exciting experience but don’t allow emotions to cloud your judgement or influence you to skip important steps. If you are planning to buy a home for the first time, try to avoid these common mistakes.
Thinking you need a big deposit
A house deposit of between 5% and 20% of the purchase price is required by most banks. Depending on the size of your deposit, you may need to pay Lenders Mortgage Insurance (LMI). There are also many grants available
to help you put a deposit on a home sooner.
In order to secure a home loan, you’ll need to demonstrate you can make regular mortgage repayments. Ideally, you want to prove to the lender that you have a steady income, genuine savings, clear credit history, minimal debts and a stable employment. If you have a history of changing jobs frequently you may find it harder to be approved for a loan.
Not getting pre-approval
Once you have an idea on how much you can borrow, chat to a lending specialist about conditional pre-approval for a home loan. Securing pre-approval clarifies your borrowing power, what your repayments will be and helps you search for a house within your budget. Pre-approval is free and valid for up to 90 days, which gives you plenty of time and confidence to find your dream first home.
House hunting outside of your budget
Many first home buyers jump straight into attending house inspections before doing their research on the local housing market. Once you have pre-approval look for properties in suburbs that suit your requirements. Your lender will be able to provide free property reports and suburb insight reports. Use this as it will give you the same information as the real estate agent which will give you the chance to make a more informed decision.
Being influenced by emotions
It’s easy to fall in love with the colour of the carpet, the white picket fence or the size of the kitchen but try not let these little things cloud your judgement. Focus on the big things which will impact your lifestyle. Consider whether the property is close to schools, shopping centres, playgrounds, public transport, highways and recreational grounds. Is the property in a nice neighbourhood with enough land? Does it have the potential to grow in value? Most house inspections are held on a weekend so try visiting the property on a weekday to get a different feel for the neighbourhood.
Pre-purchase building and pest inspections can save you a lot of time and money in the long run and could influence your overall decision of buying a property.
- Personal Inspection
Ensure that you are completely satisfied with the property.
- Building inspection
Organise a licenced builder to carry out a building inspection. They will produce a report outlining any structural issues that you need to be aware of before buying.
- Pest inspection
Have peace of mind knowing the property you are about to buy isn’t riddled with termites.
- Swimming pool inspection
Swimming pools must meet specific safety regulations, or you could be fined.
Forgetting about insurance
Home insurance provides protection against damage to your building while contents insurance provides cover for your personal possessions such as computers, furniture and jewellery. It is usually a requirement of your loan contract.
Forgetting to budget for extra costs
When you’re on a budget it’s worth knowing all the extra costs involved in buying a house so there’s no surprises later on.
- Stamp duty
This is the tax levied on the purchase of a new property and is likely to be the single biggest additional cost you’ll need to pay.
- Bank fees
An establishment fee is charged to cover costs involved in processing the application and funding the loan. This includes credit checks, property appraisals and administrative costs. Make sure you research each banks’ fees before submitting an application.
- Legal fees
A solicitor or conveyancer is usually engaged by both the buyer and the seller to manage the process of transferring the property and ensuring contract obligations are fulfilled. Solicitors will also perform searches and checks on the property and provide advice to sellers and buyers throughout the process. These services may also result in additional charges.
- Real estate agent fees
If you are selling a property as well as buying, you should also take into account the real estate agent’s fee, which is usually a commission based on the property’s sale price.
- Body corporate fees
Buying a unit, apartment or townhouse usually means being part of a body corporate scheme that handles the management and upkeep of the building and property including insurance, pools, gyms and gardens. Each unit or apartment in the building is required to pay body corporate fees. Check with your real estate agent so you can budget for this ongoing cost.
- Cleaning costs
- Consider whether you will have the property professionally cleaned before moving in.
You will need to budget for the cost of moving all your belongings to the new property. Compare prices for professional removalists or save money by hiring a truck or trailer and moving everything yourself.
- Connecting utilities
Don’t forget to budget for any extra costs with connecting your electricity and gas.
Not fully reading the contract
Ensure you have fully read and understood the contract before signing. Be wary the cooling off period. Seek advice from your solicitor if you have any questions along the way. Remember, this is a legal process, so every box needs to be ticked and signed off to ensure settlement runs smoothly. As a generally rule, settlements happen from 10am to 3pm window. You will work out with the real estate agent when you can pick up the keys, generally within 30 minutes of settlement once your conveyancer has confirmed with the real estate all is done.
The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person’s particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.