Finding a home that you love at a reasonable price can be exciting, daunting, and a little bit frightening. If you are shopping for a home for the first time, you will soon realize how stressful it can be, and how many factors you need to consider. Unfortunately, many first-time homebuyers make costly mistakes. To avoid making the same mistakes, you have to stay informed about these common homebuyer mistakes.
First-Time Homebuyer Mistakes You Should Avoid
1. Shopping For A Home First And Applying For A Loan Later
As a first-time homebuyer, you have to understand that buying a house doesn't start with home shopping. It must start with getting prequalified for a loan- unless you have enough money to pay cash for your home. The financial institution may not be willing to lend you the amount of money you think you may afford, mostly if you have a poor credit rating, or you have an unstable income. For this reason, you must get pre-approved for a loan first, before you start shopping for a home. Failure to do this, you will only waste your time. Remember the basic rule of house hunting: Get pre-approved first, and then find a home.
2. Didn't Consider Additional Expenses Aside From Mortgage Payments
A lot of first-time homebuyers decide to purchase a property when they feel that they can afford a mortgage. However, there are other expenses which you and other homebuyers need to consider. For instance, you will have to pay for home insurance, property taxes, house maintenance and repairs, homeowners association payments, and so on. Just because you can afford a mortgage doesn't mean you are ready to own a home. Do not forget to consider these additional expenses since the bills might pile up if you fail to pay for them.
3. Spending All Your Savings on Down Payment
There exist a good number of homebuyers who spend all or most of their savings on down payment. This is a critical mistake that homebuyers make since they are left with no savings at all. If you have been shopping for a property, you know by now that if you pay 20% down, you won't have to pay for mortgage insurance. This is usually a good idea since it can help you save on monthly mortgage payment. However, it is not worth the risk of living without any savings.
4. Skipping home inspection
It is natural for us to check the quality of any products we buy. The best way to know about the quality of your new home is by getting it inspected by certified inspectors. The cost of inspections will range from anywhere around $300 to $500, which is probably why many homeowners try to save that amount.
5. Not Understanding Mortgage Terms
The mortgage may be the biggest loan you'll ever take out, which means it's vital that you understand the terms. Many homebuyers use a 30-year loan to purchase their new house, which means you'll be paying on it for 360 months! It's also important to understand how your interest rate works. Many homebuyers in Australia choose a variable interest rate. This means that the interest rate will change as current market conditions change. Some buyers choose a fixed rate, however. The rate is fixed for a specific amount of time before it is then re-evaluated.
6. Repayment terms
You should also understand your repayment terms. Many people choose to pay their mortgage on a monthly basis, but it's also possible to pay it on a weekly or biweekly basis. No matter what type of mortgage you choose, you must understand the terms. Don't be shy about asking questions! Your mortgage loan officer will want to make sure that you're completely knowledgeable about what you're signing to help ensure that you don't have any surprises during repayment.
7. Not Focusing On Location
Another major home buying mistake that buyers make is not focusing on the location of their new house. If you love the design but the location isn't convenient to your work or the local shops, you may find yourself itching to move after just a few years. For this reason, it's vital that you're happy with both the home and the location when you're purchasing a house. Don't sacrifice one for another-- you'll just be unhappy down the road. Instead, ask your builder if it's possible to build that specific home design in a different location. Many builders have relationships in a variety of suburbs and should be able to help you find a great location.
8. Allowing fear to overcome your goal
During house hunting, you are to find the house that best suits your preference, lifestyle, and budget. Some homebuyers are preoccupied with various fears and worries such as the probability that they will not be able to repay the mortgage. While these feelings are normal, it does not mean that they have to overcome your goal leading to not buying your dream house at all. To avoid being overshadowed by fear and worry, talking to your real estate agent and a mortgage office can help you understand what you need to know
9. Failure to get a lawyer
A lawyer provides you with an objective advice, and it is reassuring to know that someone is on your side and not after the commission of the real estate transaction.
10. Being Blinded By A Beautiful Display Home
Lastly, make sure that you fully understand what a display home includes when you're touring through it. If you love a specific touch, such as a solid surface benchtop, you need to make sure that it's included, rather than an optional upgrade. The same goes for appliances. Some new homes may not come with appliances, or they may come with such basic appliances that you'll be facing a hefty upgrade fee if you want stainless steel. It's important to ask whether what you see is what you'll get, so you're not increasing your purchase price by adding on extra costs.
Before you start looking for a new home, avoid the above-highlighted homebuyer mistakes by talking to your friends and family members about their own experience and ask them if there is anything they would have done differently during their purchase. Learning from their mistakes is the easiest way to avoid making them yourself!