The first step in house-hunting is not window-shopping online for your perfect property (tempting as it may be!), but attaining pre-approval for a loan. Potential lenders will look into your income, living expenses and personal debt – plus your proposed deposit – to determine how much you can borrow. While the loan isn’t actually set in stone until the lender receives a signed contract, it does provide a ballpark figure for your budget.
Poor prep or rushed research can also mean newbies miss out on significant financial assistant, namely government grants. These vary across Australia and, presently, most states offer a monetary bonus for first-time buyers purchasing a new (previously unoccupied) build. Anyone for a spare $20,000?
Blowing the budget
Picture this: you’re at an action-packed auction for the home of your dreams, and figure that exceeding your limit by $5000, and then another $5000, won’t hurt in the long run. It might. Overextending yourself can cause myriad issues down the track, and leaves no buffer for interest rate rises or unforeseen financial hardship. Key here is remembering that your first piece of real estate needn’t be your “forever” home. Charles Tarbey, CEO of Century 21 in Australia, has some sound advice: “Buy what you can afford, and rent where you want to live. Further down your time in real-estate ownership, you’ll have the opportunity to buy where you want to live.”
Eschewing expert advice
These days there are a plethora of professionals whose sole job is to make your house-hunt easier. Of course they come at a cost, which is why many first-time homebuyers choose to pass on their services altogether – but they may actually save you in the long term. A buyer’s agent, for example, will scope out potential properties on your behalf, offer you access to off-market properties, and might even negotiate a better deal for you. It’s also imperative to organise a pre-purchase building inspection, plus enlist a solicitor to look over contracts.
Getting too emotional
To go with your heart or your head? Like most decisions in life, it’s best to approach real estate with a healthy balance of both. Experts agree on one thing: don’t get emotionally attached to a property before it’s yours (otherwise you might forgo due diligence and rush the process, overlooking major flaws or, as mentioned above, blowing your budget). Next time you attend an open-for-inspection, try not to imagine where you’d hang your art or spend Christmas mornings with your (unborn) children. Of course buying a home is always going to be emotionally charged, but don’t let it cloud your common sense.
Underestimating the true cost of home ownership
With their eyes fixed firmly on the prize (that being their first piece of property), real-estate rookies often fail to consider the full gamut of expenses coming their way. Beyond the actual home deposit, there’s stamp duty, loan application fees and and mortgage insurance to pay. Then there’s a whole new set of bills unbeknownst to renters, including rates, strata fees (for apartments) and ongoing maintenance. To avoid any nasty surprises, create a comprehensive budget before you buy. But you’ll also need to be prepared for the unexpected – a costly leak, for example – so set aside some funds for the future.