9 mistakes to avoid when buying your first home
Buying your first home? Avoid common mistakes with this easy guide, from budgeting and pre-approval to hidden costs and loan pitfalls in Australia.
As a first-time home buyer, it can be easy to quickly become overwhelmed with the process. From inspecting properties to making an offer and checking the contract of sale, there are a tonne of different steps and hoops to jump through before you can finally call a home yours.
With this in mind, it can be easy to make mistakes along the way, but with your life savings on the line, some mistakes could end up costing you big time.
To help you on your home-buying journey, we’ve pulled together a list of the top 10 things to avoid when buying your first home.
1. Not doing your research
When it comes to buying a home, research is essential. From reviewing the housing market and exploring the local neighbourhood to assessing comparable sales and plans for future developments, there’s a lot to be said about having a thorough understanding of the property you’re interested in purchasing.
2. Not understanding the settlement process
While we’re on the topic of research, it’s also worth familiarising yourself with the home-buying process. From making an offer through to settlement, there are a number of stages involved in buying a home, so it’s well worth spending a bit of time understanding the steps and your responsibilities as the buyer.
3. Underestimating the cost of purchasing a property
Buying a home is one of the biggest investments you’ll ever make, but are you aware of the true cost of purchasing a property? There’s more to buying a home than just the purchase price. You’ll also need to foot the bill for additional expenses, like:
- Stamp duty
- Building and pest inspections
- Land tax and property title registration
- Legal or conveyancing fees
- Mortgage registration fees
- Insurance
- Moving costs
All of these expenses combined can add up to thousands, if not tens of thousands of dollars on top of your deposit. So, to avoid any surprises down the track, make sure you account for all the upfront fees in your initial calculations.
4. Misjudging the cost of maintaining your home
As a new homeowner, there’s more to maintaining your home than just making the mortgage repayments. You’ll also need to budget for ongoing costs, like:
- Ongoing home loan fees
- Council rates
- Body corporate or strata fees (if applicable)
- Home and contents insurance
- Utilities
- General maintenance
It’s also worth accounting for potential interest rate rises. By factoring in all of these different expenses into your calculations and even adding in a buffer, you’ll be less likely to overextend yourself financially.
5. Not doing your due diligence
You may have heard the saying, ‘buyer beware’. It essentially means that you buy a property at your own risk. As a buyer, it’s up to you to thoroughly inspect the property, arrange the right inspections and check the contract of sale.
Unless you’re a builder yourself, chances are you won’t know what to look for when checking for potential issues when inspecting a home. As a buyer, you can include a building and pest clause in your contract so you can call in a professional building inspector to check over the property.
That way, if there are any major concerns they should be able to point them out so you have the option of negotiating or pulling out of the sale without penalty depending on the issue.
6. Confusing pre-approval with unconditional approval
Although getting pre-approval or conditional approval isn’t an essential step in the home-buying process, it can certainly help you understand your borrowing power and indicate to real estate agents that you’re a serious buyer.
With that said, it can be easy to mistake pre-approval with unconditional approval. Pre-approval can help you gauge how much a bank is willing to lend you but that doesn’t guarantee that your home loan application will be approved when the time comes.
7. Not checking your borrowing power
Just because you don’t get pre-approval before making an offer doesn’t mean you shouldn’t check what your borrowing power is first.
Checking your borrowing power is essential for understanding what you can and can’t afford. Having a grasp of your borrowing power will help you with your house hunt.
When you have a good idea of what you can afford, you’ll be better positioned to narrow down the suburbs you should be searching in and what type of home you can afford to purchase.
Plus, if you’re not happy with your borrowing capacity, knowing what you can afford ahead of time allows you to work on increasing your borrowing power.
8. Skipping the pre-settlement inspection
A lot can change in the period between having your offer accepted and settlement. With this in mind, it’s often a good idea to arrange a pre-settlement inspection in the days leading up to settlement to make sure everything’s in order.
Essentially, a pre-settlement inspection allows you to make sure everything is in the same condition as when you first signed the contract of sale.
If the previous owners or tenants are moving out of the property, there’s a chance that there could be some additional wear and tear that could go unnoticed if you don’t tee up another inspection.
9. Not checking the contract of sale
As the buyer, it’s up to you to carefully review and understand the terms of the contract of sale, including any contingencies and conditions that may affect the sale.
While a solicitor or conveyancer can help you with this process, it’s still important to have a good understanding of the ins and outs yourself.
Make sure to get legal advice before signing the contract of sale. Once you’ve signed on the dotted lines, everything’s set in stone and there’s nothing you can do to make any amendments.
The property buying process is a steep learning curve for many first-time buyers, but with a bit of education, research and a helping hand from a professional you should be able to navigate through the process.
Explore our collection of articles and guides for everything you need to know about buying a home.
Unloan is a division of Commonwealth Bank of Australia.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Tax law is complex and subject to change. For the latest information, check the ATO website or with your accountant or financial advisor.
Unloan is a division of Commonwealth Bank of Australia is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions are found on our Unloan Terms and Conditions. Modified Terms and Conditions will be set out in our Notice of Variation Agreement, if you are approved. This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.
