Shopping for your first house is a thrilling experience, with the excitement of walking into your potential dream home. However, the process includes critical decisions to ensure you purchase at the right price.
It’s hard to navigate through the house-buying process, especially when you’re starting. Here are six common mistake first-time buyers make:
Looking for a home without applying for a mortgage
In Australia, particularly in booming areas like West Melbourne, the competition for real estate is stiff. You might miss out on buying the house you want, or you might discover that you’re looking in the wrong price range if you don’t think through your finances.
Before you shop for houses, find a mortgage professional to draft a pre-approval letter for you. The pre-approval letter is proof from the lender that you have the means to buy the house based on your credit history, income and employment, financial assets and other factors. Sellers are unlikely to accept offers from buyers who don’t have a pre-approval letter from a lender. Once you have the letter, house hunting becomes a smoother process.
Talking to only one lender
Shopping for a mortgage is like buying a car or a gadget: it pays to compare offers. Mortgage interest rates, closing costs and discount points vary from lender to lender, and you potentially leave thousands of dollars on the table by opting for the first mortgage offered. Shop around with at least three different lenders and look for the best deal before deciding.
Spending too much or being careless with credit
Lenders check your credit score before approving your mortgage application. Any big purchases or new loans on your credit report can put at risk the chances of a mortgage.
Don’t spend too much, close existing accounts or take out new loans in the months leading up to your mortgage application until closing day. Pay down existing balances and make sure you pay your bills on time and in full.
Deciding based on emotions
It’s normal to fall in love with a house that has every feature you’re looking for, but that doesn’t mean you should buy it. Remember that you’re making a major investment so consider the practical implications. What are the pros and cons of the house and the neighbourhood? Consider your costs of living before sealing the deal.
Skipping the home inspection
A home inspection gives you the opportunity to identify any problems with the property while it’s still the seller’s responsibility. Inspecting the property prevents you from footing the bill for expensive repairs, especially if there is structural damage.
You can examine the property yourself, but in most cases, lenders require a qualified surveyor to conduct the house inspection. Hiring one may cost you now, but it’s cheaper than shelling out thousands of dollars to repair problems after the contract is signed.
Miscalculating the hidden costs of ownership
Just because you acquired a mortgage doesn’t mean you can afford to live in the house. Aside from the mortgage payment, you also have to pay for maintenance, repairs and property taxes, to name a few. Before buying a house, always consider additional costs. By looking at the big picture, you’ll get a clearer idea of whether you can afford to live in the house.
Buying your first house is a big occasion, but it doesn’t mean you can’t navigate the purchasing process smoothly. With the right knowledge and financially smart choices, you won’t regret your purchase.