Purchasing a home is an exciting time, but can also be rather confusing. It’s easy to make mistakes that will cost you a lot long term. Here are the most common ones and how to avoid them.
1.) Not getting finance sorted first
Before you go looking at a home, get your finance sorted. Find out how much you can borrow, how much you can afford to pay comfortably (rarely is it a good idea to borrow as much as you possibly can as it does not allow room in your budget for unexpected expenses) and get pre-approval for a loan.
Having pre-approval shows agents you are serious, you can make an offer then not scramble to get finance and getting finances sorted before you find a home means you have more options with an actual mortgage. Getting the home before finance will limit your options.
Talk to a broker at the beginning to discuss your options and arrange pre-approval.
2.) Damaging credit
Do not apply for credit cards, change jobs or do anything else that effects your finances when you are applying for a home loan. If you apply for loans or credit cards this goes on your credit file and can impact how much you can borrow, your interest rate and who you can borrow from. Chanigobs has a similar effect. You need stable work and a history of income for a lender to approve your home loan.
If you really want a credit card, personal loan or to change jobs, do it after settlement if it is the right decision for your circumstances.
3.) Getting the wrong home loan
Don’t get the first loan you see when you Google home loans. Do the research, compare interest rates and features of home loans to find one that suits your circumstances now and in the near future. You can refinance at a later date, however, you want to make sure you have a home loan that works for you from the beginning.
Getting the wrong long can cost thousands.
4.) Not having a clear idea of your needs
When you have the finance sorted and go looking for a house, have a clear idea of what you want or need in a home and what is within your budget. Consider size, the number of bedrooms and bathrooms you want, features such as air conditioning, out door entertainment areas, whether you want a renovated or new home compared to a home you will renovate. Write down your list of essentials in a home, then a list next to it of the things you would like or extras that would make things nicer. Knowing what you need when looking for a home will help prevent you getting swayed to buy a bigger home or a home that does match your needs and just looks pretty.
5.) Spending more than you can afford
A common trap is either borrowing as much as a lender will lend you or over extending yourself and leaving yourself with no room to breathe should something happen to the house and it needs repairs or you have issues with your job, income or finances in general. Buy ahu you want, keep it within your means though.
6.) Being obvious
Whatever you do, do not show an agent you are keen on a house or have fallen in love with it. No gasping when you look or exclaiming how wonderful and perfect it is. If you do any of that, the agent knows you want it and you lose your negotiating power. This alone can cost tens of thousands of dollars.
Be polite, but keep your extreme emotions about a home to yourself.
7.) Not doing proper research on the home
Do not buy a home without getting proper building and pest inspections or doing research on the area. Check if it is prone to flooding or natural disasters, see if it is in an area likely to increase in value, what insurance will and won’t cover for the area (there are some areas not covered for flooding for example). Know everything you can about the area, the land and the house itself to prevent any expensive surprises after you have settled.
8.) Not negotiating
You don’t need to pay full price. The asking price of a home for sale is a guide as to what the seller wants but it doesn’t mean that is the price you have to pay. You can offer lower, negotiate and get a better price especially if the building or pest inspection shows any issues and you will need to pay to fix them or if the house has been on the market for a while.
Don’t be afraid to offer lower and work your way up instead of paying the asking price.
9.) Not knowing the full cost of buying a home
The house price is only one cost associated with purchasing a home. Other costs, depending on your circumstances include stamp duty, lenders mortgage insurance (LMI), conveyancing costs, loan establishment fees, property inspections and valuations. These costs add up to thousands and need to be calculated into the cost of buying a home.
To discuss your home loan needs and arrange finance, chat with a broker today.
This article is not to be taken as financial advice. Every applicant’s personal situation will vary. We recommend seeking professional advice for your circumstances. All loans are subject to the normal lending criteria.