Buying your first home is an exciting milestone. Having your own space, painting the walls any colour you like, and building equity is a sought-after dream for many Australians. Amidst the excitement, however, it’s easy to stumble into common mistakes that can seriously taint your home ownership journey. For first-time buyers, understanding the potential pitfalls upfront is essential for a smoother, more successful property transaction.
This article flags some common problems encountered by new homebuyers; the aim being to inform, not deter you, from your home ownership goals. Remember, the information is general only and not a substitute for personalised advice from experienced professionals.
Your Finances: Don’t Get Caught Off Guard
Money matters are often where first-time buyers make mistakes, particularly, underestimating the true cost of home ownership and all that goes with it.
- Not knowing your budget: Many buyers focus solely on the property’s price tag, overlooking a raft of other costs. Stamp duty, legal fees, building and pest inspections, loan establishment fees, and even moving expenses all form part of your budget. Beyond the purchase, you’ll also have ongoing costs like council rates, utilities, insurance, and the ever-present need for repairs and maintenance. Failing to factor these in can leave you financially stretched.
- Insufficient deposit or emergency fund: Draining every last dollar for your deposit can leave you financially vulnerable. An emergency fund is vital for unexpected expenses. Think about what happens if the hot water system breaks a month after you move in or a sudden roof leak appears. While due diligence plays a key role in flagging a range of contingencies, having a financial buffer is imperative.
- Poor credit rating: Lenders scrutinise your financial behaviour and a good credit score is your ticket to satisfying lending criteria and negotiating a home loan. Before you even start looking at homes, check your credit report and think twice before opening new credit lines in the months leading up to your mortgage application.
- Not getting pre-approved for a mortgage: This isn’t just about knowing your borrowing capacity; it’s about setting realistic expectations. Getting pre-approval tells you exactly how much a lender is willing to lend you. This prevents the heartbreak of falling in love with a home that’s well outside your budget and gives you a significant advantage when making an offer, as sellers know you’re a serious buyer.
Rushing and Failing to Properly Research
The property market is highly competitive and can leave you feeling left behind if you’re not in the race. But rushing and failing to do your due diligence can lead to big regrets.
- Falling in love with the first house: It’s easy to get swept away by emotion, especially when a property ticks a few boxes. However, buying a home is arguably the biggest financial decision you’ll make. Compare multiple properties, weigh pros and cons objectively, and don’t let emotion overshadow practical considerations like location, long-term suitability, and potential resale value.
- Skipping or skimping on due diligence: This is where many first-time buyers cut corners to save money, and it’s a critical error. Always get thorough home inspections – structural, pest, electrical and plumbing. These reports can uncover costly hidden issues. Equally important is researching the neighborhood: schools, amenities, transport links, local planning for future developments, and historical resale values.
- Relying solely on online information: Online listings are a good starting point, but they are just that. Misinterpretations of market data or property descriptions can lead to poor decisions.
- Not understanding the contract and terms: Legal documents can be daunting, filled with jargon. Consult with an experienced property lawyer or conveyancer to ensure you understand every clause, condition, and deadline. Don’t be afraid to ask for clarification, no matter how trivial it seems.
Letting Emotions Dictate
Buying a home is inherently emotional, but letting emotions take the wheel can be detrimental. This is one time when you need to let your head take the lead in your decision-making.
- Giving in to FOMO: The fear of missing out (FOMO) can lead to overpaying. Frustration with the process can lead to settling for a less-than-ideal property. Take a step back, reassess, and make decisions based on logic and your long-term goals, not fleeting feelings.
- Getting discouraged by setbacks: The home-buying journey rarely goes perfectly. You might get outbid, an inspection might reveal unexpected issues, or loan approval might take longer than anticipated. Patience is key. View setbacks as part of the process, not reasons to give up.
- Ignoring red flags: It’s easy to downplay significant issues or hope problems will magically ‘fix themselves’ when you’re emotionally attached to a property. Be realistic and address any red flags head-on. If an inspection reveals major structural problems, don’t ignore them just because you love the kitchen.
Engaging Your Property Team
The professionals you work with can make or break your home-buying experience.
A good agent can be an informative guide. In most cases, however, agents work for their vendors who pay them a commission to achieve the best price possible for their property. Remember this when negotiating terms, conditions, and the ultimate price you’re willing to pay for your first home. Any negotiated agreements should be in writing and, ideally, reviewed by your conveyancer or lawyer.
While you can approach banks directly, a good mortgage broker can access a wide range of lenders and loan products. They can help you compare rates, fees, and terms, saving you significant money and stress.
Legal work for property transactions is complex and opting for the cheapest or fastest conveyancer or lawyer for your property purchase can be dangerous. Conveyancing work is often considered ‘routine’ but there is vast knowledge and numerous steps involved in a property transaction. Errors or missed details can have significant, long-term consequences. As a first-time buyer, you need someone who will answer your questions, no matter how trivial they may seem, and guide you throughout the process.
Conclusion
Buying your first home is an exciting and rewarding endeavour but can also be a roller coaster of emotions and a world of jargon. By approaching the process with patience, planning, and the right professional guidance, you can increase your chances of a successful and happy outcome. Do your homework, ask plenty of questions, and remember that slow and steady often wins the race to your dream home.
This is general information only and you should obtain professional advice relevant to your circumstances. If you or someone you know wants more information or needs help or advice, please call (08) 8232 8446 or email [email protected].