It is easy to get caught up in the excitement of purchasing your first home. Unfortunately this is when you are most likely to make one of the most common mistakes. The reasons are straightforward; excitement about your new home and a lack of knowledge about the procedures and what to expect often means you’re missing the finer detail. That’s why it’s important you know of some common mistakes and some tips to avoid them:
Skipping The Auctions
Looking for a house can be a daunting prospect; there are so many on the market! However, you may find that many of them are above your price range as a first time buyer. This can be disheartening. However, there are auctioneers in an area near you so if for example you’re in Sydney, Australia, it is possible to use the services of a Sydney auctioneer to locate property being sold at a better price than on the main markets. The process of purchasing by auction is straightforward; you just bid on the house you want up to your budget.
Setting The Budget
It is easy to use online calculators to work out, in principle, how much you’ll be able to borrow, and then start looking at homes. However, it is a much better idea to speak to a mortgage advisor and have them do the work on getting a loan pre-approved. Here are some tips, in another article, on how to choose a mortgage broker.
While it’s important to know what you could borrow, it is also important to know how much it will cost you per month to repay your mortgage. Just because the lender says they can lend you a certain amount doesn’t mean you will want to borrow it. Ask the right questions and do your own sums first to ensure you are happy with the monthly outgoings for the mortgage. Understanding in principle what you can borrow and how much it will cost, will allow you to narrow the property search and avoid any unpleasantries during the buying process. It’s a good time to mention a caveat here: Pre-approval is not a guarantee of a loan and everything can change when you find a property. A deal is only done when it’s in writing and it’s signed. Always get professional legal advice before signing anything!
Negotiating is an interesting topic. There is a skill to it and it wouldn’t hurt to do some research on how to negotiate so you’re up to the task when required. What you learn about negotiation is it’s okay to look at houses just above your price range and then make an offer based on the condition of the house and what you can afford. The seller doesn’t have to accept your offer but they may and this is where your honed skills may make the difference!
The point is not to be afraid to make an offer; the worst that can happen is they say no.
Your mortgage company will probably insist on a property inspection but even if they don’t this is something you should do for peace of mind. You want to know, there’s no major issues with the building like it’s structural integrity has been compromised or the cladding is not weather-tight i.e. it leaks. It is also important to get it done either before you put in an offer or it’s a condition before the Sale & Purchase agreement goes ‘unconditional’. Remember to engage a lawyer before signing a Sale & Purchase agreement, you’d be surprised how many do so after they’ve signed which is like shutting the gate after the horse has bolted.
It is also worth noting that you can request the seller lower the price or have repairs done (if they’re minor) before settlement. In many cases the seller will be keen to reach a compromise rather than lose the deal so a lawyer will provide the best advice on how to proceed.
One thing that many first time buyers overlook is the area. Do your research: is it the right area, location. It is important to check how easy it is to get to your work, schools (if necessary) and amenities and entertainment. Location is very important and it will make a difference to your lifestyle.
The sooner you start saving for a deposit for your home, the faster you’ll be able to get onto the property ladder. The property market does move in a 7 – 10 year cycle and if you’ve got your deposit you can move fast and choose when in the property cycle you want to make a purchase. Getting a house in the slump phase of the cycle will result in a better quality home for less.
Get and keep a good credit rating. Having no credit history means the mortgage companies cannot assess your risk or ability to pay. Build your credit record as you save to ensure you can get the best deals possible. Then make sure you always pay your mortgage, and other outgoings like your utility bills etc show consistency of a good credit rating.
Check State Grants
You may find that your country and state or region, depending on where you live offers grants for a first time buyers. This is worth knowing and if securing if you qualify. It can get you get onto the ladder earlier than you expected.
Stash A Little
One of the biggest mistakes that many homebuyers make and that includes first time homeowners is not having a slush fund i.e. have some cash on call for emergency repairs. You don’t know when your appliances will pack up and properties do need regular maintenance so always have the ability to pay for the unforeseen circumstances like a burst pipe or broken washing machine.