When buying your first home, it’s easy to get swept up in a whirlwind of excitement and make mistakes that could end up costing you later on. Even if you’ve done your research and have a good understanding of the property market, there’s a lot to take in and to think about. Here are 5 first home buyer mistakes to avoid.
1. Not getting pre-approval
Many first home buyers make the mistake of going to open homes and viewing potential properties before they’ve even met with a mortgage broker or a lender to discuss a home loan. In a property market where housing inventory is tight and competition is tough, it’s vital you’re prepared.
Before you fall in love with your dream home, set yourself up for success by securing a mortgage pre-approval. Being pre-approved sends a strong message to sellers that you’re a serious buyer and that your finances are in order to successfully secure a loan. What’s more, it means you’ll have a very clear idea of how much you can afford to spend and the price range of properties you need to be looking at.
2. Not shopping around
By simply talking to your bank or just one lender, you could potentially lose out on thousands of dollars. The more you shop around, the better your understanding of the financial options available to you and the more you can compare to ensure you get the best deal. It’s worthwhile comparing both bank and non-bank lenders by looking at rates, lenders fees and loan terms.
A Mortgage Express broker can work with you to assess your current situation, shop around on your behalf, and provide you with financial options from our panel of lenders. They’ll also be able to guide you through any potential roadblocks so you have a clear understanding of the home buying process.
3. Not paying attention to your budget
Buying more house than you can realistically afford and overextending yourself can lead to debt issues later on and could even put you at risk of losing your home if you’re unable to repay your mortgage. While it may be tempting to stretch the budget just that little bit more, buying at the very edge of your means leaves you in a dangerous position when interest rates increase or you’re faced with unexpected expenses.
Instead, be realistic about your repayments – calculate what you can actually afford to repay each fortnight or month rather than the maximum loan amount you qualify for. Remember to factor in other expenses and obligations that may not appear on your credit report when determining how much you can actually afford.
4. Not being careful with credit
With so much of lenders’ focus on credit reports, it’s vital you pay careful attention to managing your debt. Before applying for pre-approval, check your credit report for any inconsistencies or errors, ensure you have a good credit score, and pay down any debt still owing. Avoid adding any extra debt to your credit report: don’t open new credit cards or take out new loans for large purchases leading up to applying for a mortgage and ensure you pay your bills on time and in full every month.
5. Not calculating all of the costs
As a new home owner, it’s important you have a clear understanding of the extra expenses you’ll be responsible for. These could include lenders mortgage insurance, homeowners insurance, and rates, as well as repairs and maintenance of the property.
Start a savings account and aim to set aside a small amount each month to use for repairs and maintenance expenses. To avoid paying lenders mortgage insurance, consider saving for a little longer in order to save a bigger deposit.
For more first home buyer advice and assistance with securing a mortgage to buy your first home, get in touch with one of our brokers.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.
Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Australian Financial Complaints Authority (AFCA)