First-time buyer mistakes to avoid

Thinking about buying your first home? From finding the perfect location to securing a mortgage, shopping for your first home has challenges that go beyond curb appeal and interior features.

Some of the important steps to homeownership include:

  • Getting approved for a mortgage
  • Choosing the right estate agent
  • Finding the right home that fits your budget
Want to buy your first home? Our personalised guide can help

Here are five common mistakes first-time homebuyers should avoid.

1. More to it than mortgage payments

Many first-time homebuyers decide to buy when they feel ready for a mortgage. But just because they can afford the mortgage payments doesn’t mean they can afford to own a home, says Rafael Castellanos, president of Expert Title Insurance.

“They have an idea of what their mortgage payment is going to be, but they don’t realise there’s much more to it,” he says.

Property insurance, council tax, property service charges, ongoing maintenance, and utilities are some of the costs that first-time homebuyers tend to overlook when shopping for a place.

Mortgage calculator: How much can I borrow?

2. Looking for a home first and a mortgage later

Homebuying doesn’t begin with home searching. There are many things you should before buying a home, including getting a mortgage agreement in principle – unless you’re lucky to have enough money to pay cash for your first house.

Often, first-time homebuyers “are afraid to get pre-approval,” says Steve Anderson, a broker and owner at Re/Max Benchmark Realty. They fear the lender may tell them they don’t qualify for a mortgage or they qualify for a loan smaller than expected, so they just pick a price point out of the air.

And that’s not how it should be done. Yes, it’s more fun to go look at houses than to sit in a lender’s office where you have to expose your financial situation. But that’s a backward approach, says Ed Conarchy, a mortgage planner and investment adviser.

“You get preapproved, and then you find a home,” he says. “That way, you’ll make a financial decision versus an emotional decision.”

3. Not getting professional help

New to the homebuying game? You’ll need a reputable estate agent, a good mortgage broker or adviser, and solicitor.

Venturing into this process alone, without professional help, is not a good idea. While every rule has its exception, generally, first-time homebuyers should not do it alone, Anderson says.

“If you are getting divorced, are you going to go to your husband’s solicitor for help? Of course not,” he says. “Same here. If you go to one estate agent, they are only going to show you their listings. You would be best to find selection of range estate agents to help you.”

If you find an estate agent without a referral from friends or family, ask the estate agent to provide references from previous buyers. The same goes for solicitors or mortgage brokers.

“It’s very hard for first-time homebuyers because they don’t know who they are dealing with,” Anderson says.

It’s crucial to find a professional who will give you “truly independent advice,” Conarchy says.

4. Using up savings on the deposit

Spending all or most of their savings on the deposit and stamp duty is one of the biggest mistakes first-time homebuyers make, Conarchy says.

“Some people scrape all their money together to make as large as possible percentage down payment so they don’t have as much back in repayments, but they are picking the wrong poison because they are left with no savings at all,” he says.

“I’d take paying a little extra on the mortgage any day over not having money for rainy days,” he says. “Everyone — especially homeowners — needs to have a rainy-day fund.”

In most cases, first-time buyers don’t have to pay stamp duty – use our stamp duty calculator to check if that’s the case for you.

5. Getting more credit before your home purchase completes

You have a mortgage agreement in principle. You found the house you wanted. The contract is signed and is completing in 30 days. Don’t celebrate by financing another big purchase.

Some lenders pull credit reports before completion to make sure the borrower’s financial situation has not changed since the loan was approved. Any new loans on your credit report can jeopardise the closing.

Buyers, especially first-timers, often learn this lesson the hard way.

“They sign the contract and they want to go buy new furniture for the house or a new car,” Anderson says. “I remember one case where, just before completing, the buyer drove to the office and said, ‘Look at my brand-new car.’”

“I told them, ‘You’d better go back to that dealership.’” Luckily, the dealership agreed to wait a couple of days to report the loan to the credit bureaus, he says. Otherwise, it could have killed the deal.

Want to buy your first home? Our personalised guide can help
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Last updated: 2 May, 2019

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