Tips for First Time Home Buyers
It’s hard to go anywhere these days without seeing news about the property market throughout Australia. With house prices soaring in Sydney and an increase in many major property markets throughout Australia, the media is reveling in the amount of ‘terror stories’ it’s telling to first home owners, all with one strong underlying message: getting into the property market is difficult, if not impossible.
However, this is far from the truth. Sure, understanding the residential property market and how your own personal finances situate you within the wider context will take a learning curve, but there’s many different options when it comes to ways you can secure that first home loan and get you and your family into your first home sooner.
One of the best things you can do as a first home buyer when deciding whether or not to begin that hunt for your dream home and apply for a loan is to do your research. By learning from the mistakes of others, you’ll be able to arm yourself with the tools and information you need to make informed decisions and secure your loan at the best home loan rates possible.
To help you through the process, here’s some of the top mistakes first home buyers make in their journey… they’re all too common!
Beginning their search without pre-approval
Perhaps you thought you’d go along to ‘just one open home’, and before you know it, your weekends are full of house inspections. All too soon, you’ve fallen in love with a property and the excitement has built – but unfortunately, you’ve made a fatal mistake. You haven’t secured pre-approval!
Knowing you’re able to qualify for a home loan does not provide you with enough information to truly begin your property search within known parameters. Each bank or lender has their own set of rules, and the size of the loan they will offer to you can vary surprisingly from lender to lender. One of the best options at your disposal is to connect with a mortgage broker. Not only will they save you time, but they’ll be intimately familiar with the ins and outs of each lender’s requirements, and will be able to guide you to the right home loan product that falls within your borrowing capacity. By going through this pre-approval process, you’ll be able to know exactly how much your chosen lender is able to lend you. This is an invaluable tool that allows you to hunt for property that falls within your budget and is most likely much more realistic than it would have been had you skipped this process.
Not understanding the mortgage options that are available
One of the most common misconceptions first time home buyers labour under is the belief that they’re unable to enter into the market without a 20% deposit. Although some lenders will require a deposit that falls at this amount, there are many alternatives available to those who can prove a strong earnings history, financial security and have a good credit score on their side. To those who fall within these criteria, there are options that allow you to get around the 20% deposit hurdle and bring a smaller amount of savings to your lender for consideration. This could save you years when it comes to how long it takes you to get into that first home, and you stand to benefit from your property’s appreciation across that period as well.
Of course, every option brings with it pros and cons. Understanding the full range of options available to you will give you the information you need to make a fully informed decision that is best for your financial situation.
Failing to check their credit scores
Perhaps you think your credit score is fine – you’ve never missed a bill, right? However, there are a surprising amount of things that can go wrong beyond your control that can adversely impact on your credit score.
By choosing to be proactive and investigate the current health of your credit score, you can avoid any nasty mistakes further down the line. There are many options online when it comes to getting an in-depth look at your current credit score. A credit report will give you a look into your historical financial activity and show you what lenders will see when they begin to process your application. If there are any unexpected marks on your history, you may be able to negotiate to have it removed by approaching the company in question.
Understanding your credit score and position is a great step to take to ensure there’s nothing in your financial history that could cause a lender to turn your application down without warning.
Real estate can be an emotional purchase, especially when it’s a first home and the home you plan to move your family into. However, by letting your emotions get in the way, you run the risk of making an uninformed or costly decision. Keeping a level head as you research the current options on the market and making a non-negotiable list of the elements that are important to you in regards to your final purchase decision is crucial. Buying your first home is one of life’s major decisions, and it’s an asset you could have on your hands for decades. Take your time and consult the experts. Seek outside opinions and make sure you’re clear on what your buying priorities are and why.
Rushing through the contract process
So you’ve finally found your new home, your offer has been accepted and you’re ready to sign – congratulations! Before you sign that dotted line, it’s vital to take a deep breath and make sure you understand every single term and condition in the contract. This is especially important when it costs to your obligations, the costs you’re agreeing to and the privileges you will have the right to upon execution. If you’re unsure as to any of the terms or conditions, consult with your agent before signing.
First home buyers may also think they have no leverage when it comes to the terms that are enclosed in the contract the seller’s agent hands to them, but this is not the case. The buyer is entitled to add clauses which may assist in ensuring a smooth purchase process and give them added protection throughout the transition time when final unconditional approval is being sought. If there’s anything in the contract that makes you uncomfortable, address it and offer an alternative, until you’ve come to an agreement with the seller that gives you both mutual comfort and satisfaction.
The first time you buy a home it can feel a little like you’re out in the Wild West, unsure of what’s coming on the horizon and what you need to prepare for. This is a great time to utilise the service of trained professionals who’ve been working in the business day in, day out for years. Why not pick up an ally for the journey? Our home loan calculator and stamp duty calculator are the perfect tools for you to begin with as far as understanding your borrowing capacity and financial position. Beyond that, one of the best decisions you can make is to contact us today so we can undertake this journey with you. It won’t be long before you’re sitting in your new home enjoying a well-earned cup of tea – let us help you get there faster!
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