10 mistakes first home buyers make – and how to avoid them

How exciting you’ve you decided to embark down the road of home ownership! You’re probably finding that everyone is giving you advice whether you want it or not….from your parents, friends, work colleagues and anyone else you ask.

Whilst you’ll receive loads of advice on what to do, we wanted to share some of the pitfalls – some of the things you should avoid.

Don’t know your credit history

Not looking at your credit history report before you approach a lender is a mistake. This is the most important document that lenders will look at to determine how much they are willing to lend you…or if they will lend to you at all.

To avoid this pitfall, purchase a credit report which will give you a basic history of your financial activity. Approximately 1 in 10 Australians have a negative listing, which may stop them from getting a loan. Knowing where you sit before you meet with a lender gives you the opportunity to improve your score should you need to.

Not getting pre approval

Having an idea how much a lender will lend you is important, but if you don’t have pre-approval and know exactly how much you can spend it may mean you miss out on the perfect property because you don’t have your finances in place. Without pre-approval you can’t confidently put a bid in at auction or make an offer on a property without the panic of a last minute rush.

Pre-approval essentially is an approved loan amount (usually for a particular time period). Knowing this enables you to set your price range ceiling for yourself and confidently make offers on a property you want to buy.

Not choosing the right home loan

With so many home loan options around, don’t get distracted by deals that look too good to be true….because the often are. The team at LJ Hooker Home Loans can help you find a home loan that suits you and your individual situation. They are a valuable resource to tap into even before you begin to hunt around for a property, as they can help you create a realistic savings plan and something to work toward.

Make sure you are clear on the interest rates, the home loan features, do you need to pay lenders mortgage insurance and what fees apply to the loan.

Borrowing too much

Many first home buyers feel they should borrow to their limit but this can be a problem. While on paper it may appear that you can service a loan that takes you to the top of your borrowing capacity, but who knows what may happen in the future. You also need to ensure you have enough money to pay for the extra costs that come with owning a property and yes you’ll want to have a bit on the side to enjoy yourself…like money to go to dinner, movies with a friend or perhaps even a holiday.

When working out how much you can borrow – borrow less than you can afford to pay back and you’ll be a lot less stressed.

Not getting a pre-inspection report

Some properties come with a whole lot of “issues” that are not visible to the naked eye and easily missed by a first home buyer who may not know what to look for. Common problems such as structural issues, electrical, wiring and plumbing problems, roofing and leaking issues and pest issues can cost a fortune to fix – and you’ll find yourself throwing money after money trying to fix it.

So even if the property price seems perfect and you think the property looks great when you are inspecting it yourself – that’s not enough…Make sure you get a professional pest and building inspection report to understand exactly the condition of the property.

Not understanding the additional costs of buying a property

Not being aware of the hidden costs of buying can be a major issue when you are two thirds of the way through the purchase and you are hit with a multitude of costs. When budgeting add an extra 5-7% of the purchase price to help cover you. The main additional costs you should be aware of are:

Getting too emotional

You may have found ‘the’ property, the one that ticks all your wish list…but stay calm, don’t show too much emotion at the open home, don’t give your position away to other buyers. It’s good to keep your cards to yourself as it may help you with negotiation down the track.

This also applies to buying a property at auction. Make sure you know your maximum spend threshold and stick to it. Don’t get emotional and spend over your limit.

Not utilising the first home owners grant

Every state and territory offers some significant incentive for first home buyers. Whilst they vary across the country – you could be eligible for tens of thousands of dollars via your states First Home Owner Grant. Make sure you do your research and ensure you meet all the criteria before applying.

It is worth looking into the First Home Buyer Super Saver Scheme that helps you save money via your Superannuation fund. For more information click here:

Not getting a solicitor or conveyancer to review the contract

Buying a property is a legal transaction, whereby the seller transfers the title of the property over to the buyer for an agreed sum of money. This transfer is an important part of the process and not using a conveyancer or solicitor to review your contract, to ensure you are buying the property you think you are, without unknown issues and that you understand the terms and conditions of the sale is critical.

Before you sign the contract of sale it’s very important that you find a solicitor or conveyancer to review it. They will research the property to find out if any title work needs to be done, they will take care of taxes and fees and ensure the valuation is accurate. They will help handle questions you may have with the agent and sort through all the legal paperwork. Don’t skimp on this step – it is really important!

Not doing enough research

Rushing in and buying the first property you see without doing any research into the national and local market, the neighbourhood and even the street is a mistake. Knowing how much similar properties are selling for in the area is important so you don’t pay too much. Knowing what the neighbourhood and street is like is important so you don’t end up buying in an area that you end up hating. Your local LJ Hooker agent have local market reports that can help you understand the market, plus attending multiple open for inspections and auctions will all help ensure you become a bit of a property expert. Use our handy inspection checklist and keep notes on why certain areas offer higher prices than others…don’t rush into any purchase you might forget.

Things You Need to Know When Buying Your First Home

Are you thinking of buying your first home? It’s likely you’re going to have a number of questions on your mind. And as a new entrant to the housing market, it’s natural that you should!

You may wonder what you should look for in a property, which home loan to select and what kind of assistance is available to you, here is some advice to get you started

Are you thinking of buying your first home? It’s likely you’re going to have a number of questions on your mind

Do Your Homework

Obtain pre-approved for a loan so you know exactly how much you can spend before you even begin your search.

Having a loan pre-approved means you will be ready to act immediately once you find the right property and there will be less chance of someone else beating you to it. Make sure you have pre-approval in writing from your lender.

You may have fallen in love with a property but be sure to do your research before getting too attached or making an offer. Important factors to consider when determining what you are prepared to pay include the position of the property, the size (how much property are you getting for your money), the condition and if any upgrades are necessary and future capital growth potential.

Essential factors to consider:

Understanding the real estate market you want to buy in – Before making any final decisions, seek professional advice from somebody that has nothing to gain from you buying the property.

Understanding the practicalities of buying a home and the sales process – By doing this before you make an offer or bid at an auction it will help your chances of finding the right property sooner. It is a good idea to read up on how auctions work and tips on bidding, the same goes for making an offer on a property for sale by private treaty. It is also worthwhile speaking to friends and family members about their home buying experiences.

Creating a list of all the properties you have seen – This helps to keep track of what you’ve looked at, the features of each property and the asking price. Noting down everything from the number of bedrooms, parking, condition, agent’s details, asking price plus services and facilities in the area will help to paint a clear picture of each property. This is also a good way to compare the pros and cons of each property and what you may need to compromise on. We recommend downloading our Open for Inspection checklist. We buy ugly houses in West Palm Beach Fl

Protect Yourself

Never buy anything without getting an independent building and pest inspection report done, as well as a strata report if you are buying an apartment. These reports will highlight significant defects or issues relating to the property.

A report will cost a few hundred dollars, however this is money worth spending. You do not want to discover a major structural problem with the property once you move in, which could potentially cost you thousands.

For apartment buyers, doing a strata report is a must and will show you the records of the strata scheme, which can include any special levies proposed in the future that you may be required to contribute to, a history of the building’s maintenance work, as well as the amount of money in the sinking and administration funds.

These are all factors that could have a big impact if you become an owner in the building. There are companies that specialise in compiling strata reports and you will need to pay them a fee or you can opt to search the records yourself. This usually entails making an appointment with the strata manager to view the books.

Never sign anything you do not understand. It is best to have your solicitor or conveyancer review the contract before you sign an offer to purchase or exchange. Check the inclusions and exclusions and the length of settlement. If you are unhappy with any of the terms, you may be in a position to negotiate with the seller.

Being Practical

Remember to look at all aspects of the property. It is about balancing the pros and cons as no property will ever be perfect. Try to make educated decisions based predominantly on common sense.

Consider who your neighbours are going to be, parking availability if a carspace does not come with the property, any repairs or renovations needed, future development planned for the surrounding area, proximity to amenities like shops and transport, noise pollution from traffic and aircraft and the overall street appeal.

While you may be willing to live with or without some of these things, they could have a big impact on the resale value of the property and will need to be factored into the price you are prepared to pay.

Tips to remember when considering a property:

Choosing the right area to buy in is important and not just from a capital growth point of view. Where you live becomes a big part of your life and essentially forms the lifestyle you live. Consider the distance you are prepared to travel to work every day, is there a direct public transport route? Are there adequate amenities for your needs and your family? Find out where the nearest hospitals, schools, shopping centres and recreational spaces are all located. These things all have an impact on your everyday life and happiness.

Be prepared to act quickly, especially once you have found the property you want. Whether it is the first property you spot or you’ve been looking every weekend for a year, if it feels right, is in your price range and you’ve done the necessary checks then go for it before someone else beats you to it. On the other hand, if you’re not sure then don’t be pressured to act quickly or let yourself get talked into buying a property you don’t like.

If you are interested in a property, keep up communication with the agent. Make sure they know you are interested so you don’t miss out to another buyer who was more proactive. Give yourself every chance of buying it.

Try not to let your emotions get in the way, which is sometimes easier said than done. Buying a property can be a rollercoaster ride, particularly if you are buying at auction. The worst thing you can do is to get carried away and go beyond your budget. If you feel you have become too emotionally attached to a property, ask a friend or family member to bid on your behalf. Going beyond your means could have a huge impact on your future financial plans and goals. It is better to play it safe and always consider future events that could impact on your ability to repay your loan, like job security, interest rates rises, health and starting a family.

Know when to compromise, when to stand your ground and when to walk away. While compromises will always need to be made when buying property, just make sure they are reasonable and well thought out. Waiting for the perfect property to come along could take forever, settling for less than perfect now could mean moving up the property ladder a whole lot quicker.