Buying a home is a super exciting time! It’s the great Australian Dream after all.
But it can also be tough, especially for first-time homebuyers.
A staggering 52% of new homeowners experience buyer’s remorse after closing the deal. Even with your parents, spouse, colleagues, and friends around to advise you, it’s easy to make mistakes.
At Upstate, we’ve seen them all, which is why we’re here to help you make more informed decisions to find yourself in a better place. We’ve compiled a list of the 10 common first-time homebuyer mistakes to avoid so you can purchase a home you will be proud of.
10 Mistakes You Must Avoid When Buying Your First Home
Buying a home is a big decision and a significant financial investment.
So, if you don’t wish to regret your decision for many years to come, take the advice of our real estate veterans and avoid these costly mistakes when buying your first home.
1. Going house shopping without Mortgage Pre-Approval
Where can you afford, what size is right, and what is your ideal price range?
These are the most important considerations you should be asking yourself before you even start looking at real estate. Unfortunately, potential buyers often land an awesome deal but then can’t make a serious offer because they don’t know how much they can potentially borrow with a mortgage. Talk to your Bank, get your finances in order, and see what you can afford before making a bid on a property.
2. Not shopping around and moving too fast
As we said – you’ll be excited when you start looking around for your first home – and so you should be.
It’s a good thing because it’ll give you the energy and enthusiasm you need to see things through. However, don’t let your excitement blind you into making rash decisions.
It’s easy to fall in love with properties and deals that have been spruced up to attract unwary customers. Usually, these come in the form of faulty properties with new paint jobs, mortgage loans with hidden costs, unusual land divisions and other problems. Always take your time, seek professional real estate help, and compare three or more offers even after you have found your ‘dream home’.
3. Not having enough for a deposit
Many mortgage lenders and Banks often have “special” offers or conditions for new home buyers.
For example: while the conventional deposit to purchase a home is usually 20% of its full cost, most mortgage lenders are willing to let you buy with less than 20%, provided that you are willing to pay for Lender’s Mortgage Insurance (LMI).
While this may seem like a good deal, the catch is that you may be paying much higher monthly payments, a higher interest rate, and a collection of other expensive deductions that can quickly overwhelm you. It’s always smart to wait until you have 20% or more to put down as a home deposit so that you can have more negotiating power and avoid extra costs.
4. Using up all of your savings
Everyone knows how important it is to have a bit of savings tucked away for a rainy day.
You shouldn’t use this money to bump up your deposit as it will leave you exposed. Unfortunately, most first-timers forget that accidents don’t take a break just because you’re paying a mortgage. If you don’t have enough set aside to get you through an emergency, you can quickly get in the red and potentially default on your loan.
5. Buying without performing sufficient due diligence
When you buy a home, you buy into the neighbourhood, a building and a whole lot of other associated circumstances. You may end up getting frustrated by your neighbours, the lack of security, the noise and pollution, the distance to schools and local amenities, or maybe even the local culture.
However, you can avoid this by doing a good background check around the area to ensure you’re making the right decision. For example, visit the local streets, go to the shops, check out the restaurants, drive around to see what’s close by and do some general research to see what life may be like there.
6. Biting off more than you can chew
Buying an amazing home in a great suburb is the ultimate goal – but this can also be expensive, especially when looking in Sydney. A common first home buyer mistake can involve getting blinded by the glamour of a premium location that you can barely afford and then having to struggle for the next 10 or so years.
Plan your finances carefully so you know your limits.
7. Not reviewing the Home Ownership costs
This is one of the most common home-buying mistakes we know of!
Remember that your mortgage is just one part of the expense. There will be utility bills to pay, taxes, home insurance, maintenance, and many other costs associated with homeownership.
Don’t let this put you off, however. Just make sure you account for these additional costs.
You can perhaps ask the seller to summarise the typical costs of what they commonly pay. This will help you gauge how much you’ll be spending on average so you can make informed decisions. If you determine your home will need a lot of maintenance over time or you want to renovate, keep those cost in mind too.
8. Not being clever with credit
Every purchase, every credit card and every financial commitment you make influences your credit score and ultimately your suitability for good mortgage terms.
From the word go, make sure that you are smart with your credit so that it’s easier to secure a mortgage to buy your first home. Pay off debts when you can, avoid luxury purchases on credit, and keep your payments up to date.
9. Waiting too long
While patience is a virtue, especially when trying to avoid first home buyer mistakes, you don’t want to wait too long as property prices can shift in the meantime – and they usually trend upwards over the years. If you have done sufficient research, you have a deposit and a stable income source, then take the plunge and become a homeowner.
Millennials are most likely to hesitate when it comes to buying their first home. If you are earning money, it’s a smart thing to always be saving for your deposit so you’re ready.
10. Getting too emotional
While buying your very own home is a very rewarding journey, it can also be a long process too.
You can become overly invested in the process – and rightfully so because this is a home you’re buying. However, emotional decisions almost always end up causing common home buying mistakes.
Try to be objective and view the transaction as pure business. If you don’t like the terms, walk away no matter how much you like the home. If you have suspicions, hold off until you have the reassurance you need to feel comfortable. While you will ultimately have to compromise on something (that’s common when buying), make sure to use your head more than your heart.
How to buy your first home
These ten first home buyer mistakes to avoid will help you dodge these common problems and regrets that so many other people face. If you do this, you’ll be well on your way to making a great buy!
Always remember that it’s a huge step forward toward in life when you purchase the first home of your dreams. Here at Upstate, we’re here to help you find yourself in a better place.
So, let us help you!
We understand: buying your first home can feel a little daunting.
Where to start? How to start? What to start?
Just breathe, because we’ve got you covered.
Give us a call on 9971 9000 or click here to contact us.
We look forward to chatting with you soon.
Signing off (and always here to help),
Your local Upstate team.