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For many people, buying a first home is an exciting first step for building a life together. Getting on the property ladder won’t just benefit you; it can benefit future generations too. Property can act as a heirloom for children or grandchildren and give them the helping hand they need to start their own paths.
Property should be viewed in a long-term way so it’s important you are well prepared as you start your search. Unfortunately, most first-time buyers find that there are some bumps in the road but the more prepared you are, the easier it will be to hop over these hurdles. To avoid making mistakes, here are some of the most commonly made.
No Pre-Approval
You may be itching to start looking at properties that suit your needs but it’s always wise to wait for pre-approval on a mortgage. It can be heartbreaking when you find a dream property only to find out you’re not pre-approved and another buyer beats you to it. Before you begin your search for the perfect property, it’s vital that you know what’s within your reach.
Talk with your mortgage advisor and find out what you could borrow. Once you know what you can borrow, you can start to make applications. If a lender is willing to give you the money, you will receive an agreement in principle (AIP) which will allow you to make an offer on a property.
No Shopping Around For a Mortgage
This is essential for first-time buyers. When it comes to mortgages, the more research you do, the better equipped you’ll be to find one that suits you. As someone who has never had a mortgage before, it can all be a bit confusing.
A financial advisor can talk you through how mortgages work and what to expect. You can then ask for advice on how to shop around for mortgages and what you should be looking for. If you can secure a low-rate mortgage that’s fixed for a few years, you’ve found yourself a good deal.
Ignoring Funding Options
There are more incentives for first-time buyers than ever before. As the number of people buying homes for the first time drops, the government is keen to get people on the property ladder. You could be entitled to apply for a grant that will help you get your foot through the door.
The $25,000 first-time home buyer grant application is now open so it’s worth looking at whether you qualify. Again, a financial advisor will be able to tell you what kind of funding is available in your area and how to get the process started. If you don’t find out about these funds, you could be missing out on a significant amount of help.
Ignoring Your Credit Report
Your credit report will give you the best indication of what lenders see when you apply for a mortgage. All of the information on your credit report will be viewed by lenders. So, if there’s something on there that could affect how much money a lender trusts you with, you need to address it.
There may be mistakes on your credit report that could affect your lending. If that’s so, you can make the necessary comments to correct the mistakes.
Privately Buying
A private sale of a property could save the seller and buyer money during the process. If you’re buying a home directly from a friend or family member, this can make sense. On the other hand, if you’re buying from a stranger and you’re not sure about what you’re doing, it could cause a lot of stress.
Having a real estate expert help you with the purchase of your first property is convenient and will help to take some of the weight off your shoulders. You may be paying more money but the process will go a lot smoother from start to finish.
Not Working Out What You Can Afford
Unfortunately, this is one of the most common mistakes first-time buyers make. You must know how much you can reasonably afford to repay each month. Although mortgage lenders will look through your income and expenses, they don’t take things like food and clothing into consideration.
Stretching yourself to the limit to repay a mortgage may mean that you struggle to live well in your home. If you have your dream home but you can’t put food on the table, your home may feel like more of a burden than an achievement. Spend some time calculating how much disposable money you have each month so you don’t purchase a property you can’t afford.
Skipping A Home Inspection
Getting a property properly inspected can be costly but it’s certainly worth it. The last thing you want to do is purchase a property you love only to find it’s riddled with problems. Some properties could come with issues that cause problems far into the future and cost you much more than the price of an inspection.
Only ask for inspections on properties you intend to make an offer on. Don’t make your offer until the inspection comes back and you have a clear evaluation of the state of the property. Remember that many properties will look well maintained at first glance but an inspection could unveil unseen issues.
Not Saving The Money Needed
Purchasing a home for the first time will always be more costly than you expect. Many first-time buyers become so concerned with saving for the down payment that they forget about the many other costs involved in buying property. There will be payments to make at the same time as purchase and payments that will be ongoing.
For instance, closing costs can be up to 6% of the purchase price of the property. Then there are home insurance costs which are essential if you want to be accepted for a mortgage. You’ll also need to prepare yourself for moving costs, such as hiring a moving van and any costs involved in switching your energy supplier or getting your WiFi up and running.
There will be ongoing costs like maintenance of the property and property taxes. You should also factor in utility costs- it can help to get average costs from previous owners.
Not Researching The Neighborhood
You may have found the perfect house but what is the neighborhood like? There are many things to consider when buying your first home and it’s not just what’s within the four walls. If you have a family or plan on starting a family, you’ll want to find out about the nearest schools.
It’s also wise to search for the crime rates in the area before making a decision. How far away is the property from shops and other businesses? How long will it take you to get to work? Even if the property is exactly what you want, you may not enjoy living there if the neighborhood isn’t suitable.
Making Quick Decisions
There’s no denying that buying your first property is a big thrill. Finally, you’re in a position to jump on the property ladder and you want to do it yesterday. Because of this excitement, it’s easy to make emotional decisions that you may regret later on.
It’s important to remember that above all else, this is a financial decision. It should be made cautiously, even if optimistically. Try and take your time with decisions so you can make sure you’re making them for all the right reasons.
Failing To Negotiate
Making an offer on a property can feel a bit like playing a game. The seller will want to make as much money as possible but that doesn’t mean you should offer the asking price straight away. Many sellers are willing to go lower for a quick sale so you could save yourself some money by negotiating.
The problem with this is that you may need to play, what seems like, a long game. If you’re the only person interested in the property, you have the perfect chance to secure it at a lower price. A bit of back and forth will ensure everyone gets a good deal.
Waiting Too Long
Having said that, there is such a thing as waiting too long. If you make the sellers wait too long for a counteroffer, another buyer could swoop in when you least expect it. Similarly, it’s essential to remember that there’s no such thing as the perfect home.
You may have a list of things you want in your dream home but it’s unlikely you’ll get to check all those boxes. So, if you get a property that hits eight out of ten of your requirements, don’t overlook it. Waiting for the perfect home to come could mean that you’re waiting for a long time.
To avoid making mistakes when you purchase your first property, the best thing you can do is get as much advice as possible. Don’t jump into anything before learning as much as you can.
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