20 Dec 5 Mistakes First Home Buyers Make
Buying your first property is incredibly exciting and one of the big life events for most people. However, it’s important to go about buying a property in the right way and avoid some of the big mistakes many people make.
Here are 5 mistakes that you should avoid when the time comes to buy your first home.
Not Getting Preapproved
Arguably the most important thing you should do before even starting to look for a property is to speak to a mortgage broker in Melbourne and start working towards getting a preapproval.
A preapproval is simply an indication that you will likely get a loan from a certain lender if you meet other conditions put in place with the property that you purchase. What a preapproval means is that you know exactly what you can spend when you go out and start searching for a property. This can give you a lot of confidence when the time comes to make an offer.
Many first home buyers assume that getting finance is quick and easy and while it might be in some instances, everyone’s situation is a little different. With demand for loans at record high levels, approval times are getting longer and longer.
If you’ve got a preapproval in place that makes your offer look a lot stronger to a vendor and it might even help in getting in over the line.
Underestimating Additional Costs
When you purchase a property it’s vital that you factor in all the other costs that come along with it.
The biggest additional cost is typically stamp duty, however, first home buyers are normally exempt if they meet certain criteria. The requirements vary between the states and territories.
Other costs that you have to factor including, conveyancing, inspections, valuations, loan application fees, home and building insurance, strata fees (for a strata building) and council and water rates.
Getting Too Emotional
Buying a home to live in is both exciting and emotional, but it’s important to not let those emotions lead to a poor or rash decision.
If you get attached to a property that can lead you to spend more than you should. The best way to avoid this is by knowing just how much the property is actually worth. You can do this by looking at other recent sales of similar properties in the same area that are similar.
If you’ve got your preapproval in place, you’ll also know just how much you can spend.
Putting in the Correct Conditions
When you purchase a property, it’s important that you have all your bases recovered. When you’re paying a significant sum of money for a property, the last thing you want is to find out that there are structural issues with the building or a termite problem.
The best way to take control of this is to purchase the property subject to a building and pest inspection. However, if you’re buying at auction, you’ll need to have this done, prior to the auction as the sale is unconditional. Either way, it’s an inexpensive way to get peace of mind.
The same thing applies to a finance clause. If you need to get finance from a lender to pay for the property, then you will need to include a subject to finance clause. If you’ve got a preapproval in place, that should give you and the vendor confidence, however, there are some things that the lender will need to do. One of those is a valuation. If the independent valuer finds the property is worth less than what you paid for it, you might have to make up the difference. This can happen in hot markets. Using a subject to finance condition can help protect you in this event.
Overstretching the Budget
When you sit down with your mortgage broker in Melbourne, it’s important to get clarity around what you can spend and your overall borrowing capacity.
However, it’s important that you don’t take on more than you can afford. Just because a lender is willing to give you a loan up to a certain dollar figure, doesn’t mean you need to spend it all on a property.
It’s important that you only spend what you can afford. Assume that you will face higher interest rates than what we’re currently experiencing. Make sure you’ve got a buffer in place so that if you lose your job for a period of time, you can still manage the repayments.