Congratulations on looking to buy your first home – it’s a big step! As this is a long-term commitment, you want to be prepared for what’s to come. Let’s avoid unnecessary headaches (heartaches too) and get the most out of your new journey!
I’ve guided countless first and experienced home buyers, and the successful ones were always prepared. You’ll be talking about numbers a lot so budgeting and facing the reality of your finances is crucial. If this made you tense, don’t be discouraged!
Here are my 10 tips for first home buyers:
1. Budgeting. Let’s keep it real. Break down your spendings and income. Be honest with yourself and don’t be ashamed.
- How much is left after your spendings? Work out how much deposit you can put down and what monthly mortgage repayments you can afford.
- Don’t underestimate or overestimate what you can afford. Just because you have the deposit ready does not mean that you’re good to go!
2. Debt. If you’ve got a bad credit rating (google ‘free credit rating’) or simply have some debt, it would be wise to revisit this and get it sorted before moving on to getting a LARGER debt. You may get rejected for your mortgage application – which is left on record.
- Consider consolidating your debt and avoid high interests.
- If you have small debts here and there that you can easily pay off, do it!
3. Are you aware of extra costs? Many get slammed by unexpected bills. Take the extra few minutes to read the fine lines and consider all the costs:
- Paperwork fees: Registration/transfer, stamp duty, property valuation, application
- Service costs: Conveyancing, bank fees, mortgage insurance, solicitor
- Other: Removalists, pest inspection, strata (levies and insurance)
The right real estate agent will guide you through this so that you don’t miss anything and also avoid anything unnecessary. I’ve seen the total of these costs go over $10k so better be safe than sorry!
4. Home loan options. Google ‘free home loan calculator’ as this will help you see what’s currently on offer for your budget. Remember, this is a competitive market! Compare and research as much as you can so you know your options – get a good rate and beneficial features.
- Be aware of the different types of loans:
- Variable rate
- Fixed rate
5. Deposit size. The bigger the deposit, the better: you can get a larger loan and lower interest rates. If you go over 20% deposit you don’t have to pay for the lenders mortgage insurance.
However, this is assuming your debt is sorted and your budget allows a larger deposit. Keep in mind that emergency situations do happen so don’t spread yourself too thin.
6. Be open to different locations. Explore other suburbs to be 100% sure that you like that area and maybe find something better – consider the following
- What is the council like? Are the streets, footpaths, parks, shops, and transport well maintained?
- Does the community suit your needs? Take note of the schools, extracurricular activity facilities, churches and other facilities and activities.
- Are there any upcoming developmental projects? If they’re building something for the next 5 years, you may need to consider noise and other inconveniences. But from an investment perspective, will this development add value?
7. You’re competing with other buyers. If you’ve find a place that you love, you’re probably not the only one. Get your paperwork and deposit ready. A Pre-approval will most likely bump you up so if you can, go do it!
8. Inspect the property thoroughly. Picture this – you buy your dream house, everything is lovely. A month later the plumbing has issues, you need pest control, things break apart etc etc. Remember that the seller is SELLING TO YOU so they may not tell you everything if not anything wrong with the property.
Check the property before you sign anything:
- Building inspections
- Pest inspection
- If you see any damages, take photos as evidence and ask the seller
Don’t be ashamed of being pedantic – this is probably the biggest purchase of your life. The right real estate agent will do this on your behalf to ensure there are no hidden parts.
9. Expert help. The home-buying process is a job in itself on top of your full-time job and taking care of your family. Experts can guide you through the process and make it smoother. Did I mention that experts help you and actually do some of the paperwork? You should consider: a real estate agent, mortgage broker, and a licenced conveyancer
10. Stick to your budget. Many first home buyers over-extend their budget and don’t take it seriously. This can cause you to end up in a difficult financial situation in the future – I’ve seen this firsthand. You never know what will happen in the future and how your budget will be affected.
As you can see it can be a nightmare if you’re not prepared so take all the help you can get. I hope to hear more success stories of first home buyers rather than tragedies! If you have any worries or questions about buying your first home, let’s grab a coffee and have a chat!