Buying a house, especially if it’s your first, can be confusing. Real estate agents throw around a lot of terms that make no sense and everyone gives you different and often conflicting advice. There’s a bit to learn and probably some glossaries you should flip through; but here are 5 mistakes to avoid on your road to homeownership.
Not Having a Clear Budget
Setting out a clear budget means you can be sure of exactly how much you can afford to spend on a house. Always remember that getting approved for a home loan doesn’t necessarily mean you can afford homeownership. Sit down and list out all of your expenses, break them down weekly, fortnightly, or monthly. List out everything. Utilities, taxes, car loans, transport costs, insurances. Even the little things like Spotify and Netflix subscriptions. A home loan is a thirty-year commitment so it’s vital to know exactly how much money you’ll have. Purchasing a home you can’t really afford can end in nasty financial problems.
Not doing proper research and preparation
Like we said earlier, a home loan is a thirty-year commitment. Make sure you know exactly where you stand with your finances, do you have previous debts you haven’t resolved? Do you know your credit score? How much backup money do you want to have saved for ‘a rainy day’. Do the thorough research of the home buying process and exactly what costs are involved, research your real estate agent and find one with positive reviews, and research home loans.
Once you’ve been approved for a home loan, research suburbs or neighborhoods before you start looking. Work out exactly what you want and what you need. Consider whether you’d like to be close to schools, bike or running routes, or parks. Research practical things too, like the crime rate, school quality, and public transport. There are helpful online tools that provide property reports so you can get a good idea of the price range you’re looking at.
Not Considering Added and Hidden Costs
You know when you just get your drivers license and it’s the most exciting time in your life. Until you find out that after you buy the car you have to pay for fuel so it runs, pay for it to be regularly serviced, pay a fee for owning it, pay to ensure it, pay to park it, and even change its tires every so often? Buying a house is similar, it’s so exciting but there is a tonne of hidden costs that surface again and again.
One of the biggest financial mistakes when buying a home is being unaware of those hidden fiscal ‘surprises’ that accompany the purchase process. Consider application fees, mortgage registration, legal fees, home, and contents insurance. It doesn’t end there, more costs come from stamp duty, mortgage insurance, plus utility rates and council rates. Hidden and added costs can come to at least ten grand… and pretty quickly. Research thoroughly and put together a second budget for the estimated added costs. Add the costs to your mortgages repayments so you know you’re on top of it.
Ignoring the Resale Value of the House You Want to Buy
If you’re shopping for your first house, you may have an idyllic mindset that you’ll live there forever. Maybe you don’t expect to live there forever but you love it so much right now that you don’t care about its resale value. Regardless, there’s always a chance you may have to sell your house to move on, whether it’s for a job transfer or a growing family. When you’re buying a house it’s good to have an understanding of what the resale value might look like. You can’t predict the economy but you can research the suburb and see if the house values have increased or decreased over time. You can consider ways you might add value to the house itself.
Neglecting the Value of a Home Inspection
Sellers are exactly that, sellers. When they take you through a home, they want you to buy it. They’ll point out all of the positive aspects and downplay any of the negative. It’s your job to work out whether it’s actually a good home.
Don’t trust everything they tell you. Hire a professional to carry out a thorough inspection of the house. They’ll check for things like structural issues, asbestos, plumbing problems. They’ll help you avoid massive repair fees and quote any damage they find, so you can possibly even secure yourself a better deal.
