Buying a home is a challenge, whether you’re a first-time buyer or not. Even if you have purchased a home before, between a fluctuating economy and an ever-changing market, it can be difficult to understand without constant involvement in buying a home.

Everyone in life makes mistakes and hopefully learns from them. But when it comes to purchasing a home, simple missteps can be a lot more costly in the long run. With such a significant investment, it’s vital to take the time to do research ahead of time. 

Let’s take a look at a few ways to avoid making mistakes as a first-time home buyer.

Property Searching Before Getting Pre-Approved

Pre-approval is when a lender agrees to lend you money for purchasing a home. Not knowing your financial situation prior to looking for homes can lead to unrealistic expectations of what you can afford in the future.

You can avoid this by using the loan amount as a guide to what is possible and comfortable for you in the long run. It is recommended that your mortgage payments should be around 25-30% of your net income to allow adequate spending room for the costs of living, additional savings, investing, and other spending. Also, by having a clear layout of your budget, you will be able to look at areas and properties that are more affordable.

Being Unaware Of Hidden Costs

The price of a property is not the only cost you face when purchasing a home. Unfortunately, many first-time buyers are unaware of hidden costs when buying. Though some of these may not apply to your situation, it is still important to set aside extra savings for unforeseen expenses.

Hidden costs that you may want to prepare for include:

  • Loan application fees
  • Building, pest, and other inspection fees
  • Government fees like stamp duty and land transfer fees
  • Legal or conveyance fees
  • Removalist charges
  • Insurance
  • Connecting gas, electric, and phone lines

Not Having Extra Savings

It’s an expensive process when buying a home in Australia. Lenders often require 5% of the property price to come from genuine savings accrued within 3-6 months. To avoid the higher interest rate when putting down a low deposit, take time to save 20-25% of the property price.

Understandably, most cannot afford or are unable to save that much in a certain amount of time and need to rely on their parent’s help for a deposit or a loan. If you don’t have access to funds from family, it may just take a longer amount of time to save appropriately. You can also look into government assistance or other programs for first-time buyers.

Borrowing the Full Limit

It’s very tempting to see a high number offered for lending, but it isn’t always the best idea to borrow up to your limit. A bank or online calculator won’t account for future circumstances and only calculates your borrowing power based on current income and expenses.

By not thoroughly calculating future life expenses, you could potentially risk missing mortgage payments or even mortgage default. Map out your short- and long-term goals to more accurately consider your borrowing limit.

Not Budgeting For Ongoing Costs

There is constant work that goes into homeownership. This may already be apparent to most, but then when actually facing the expenses, it can be rather daunting at the moment.

Budgeting for these costs that come with owning and maintaining your home help with the initial search and play a deciding factor on what type of property you may be looking for. The larger a home is, the more ongoing maintenance costs you’ll face.

It’s exciting to buy a house, but what’s even more exciting is getting to decorate it how you please. Furniture or household items should be calculated beforehand, as well as any renovations you plan on making. 

Skipping Pre-Purchase Inspections

It may feel as though it isn’t worth spending the few extra hundreds of dollars for things like building or pest inspections, but these inspections may save you from spending thousands later. You want to ensure you’re purchasing a structurally sound building when investing such a large amount of money.

Aside from understanding the structural integrity of your property, having pre-inspection reports can be a negotiation tactic. Items that need to be addressed can be outlined before signing a contract, and if an owner is unwilling to fix said problems, you can use it to lower your offer so the extra money can cover the costs of repairs.

Lacking Confidence To Buy

Feeling unsure and lacking confidence can hinder when meeting with a real estate agent. You might find yourself unable to ask direct questions or not able to negotiate properly, leading to missing out on certain opportunities by not acting quickly enough or being unprepared. When feeling confused about the process and the market, you might turn to friends or family that don’t have adequate experience that comes with real estate. 

Having someone on your side to guide you when making such a large investment can take a load of stress off your shoulders and give you the boost you need when negotiating. Or, if negotiating immediately makes you anxious, you can have a trusted property advisor step in.

At EDA Property, we’re here to offer honest and transparent advice with all of your investments. So first-time buyers in Melbourne can ask questions and gain the confidence to make their home buying process easier.

Contact us today for a free consultation.