The biggest financial decision you’ll ever make is buying your first home. It’s one of the most exciting, nerve-wracking, and stressful times in your life. Any risks you take when buying a house can cause significant repercussions down the track. Here’s an outline of six of the most common mistakes that people make when buying a house and how to avoid them.
As the saying goes, fail to prepare, then prepare to fail. Savvy home buyers will do a lot of number crunching before they even think about house hunting in any form. It is vital to understand your assets and debts. It is equally vital to get pre-approval for financing before you start your search.
Be sure to get to know the neighborhoods your considering when house hunting – you’re not just buying a new property, you’re investing in a location. Learn as much as you can about crime statistics, the general overall area, and school quality before you come to a decision. Physically visiting or driving around the area is helpful to get a feel for an location.
GETTING CARRIED AWAY WITH EMOTIONS
For many, the emotional toll of searching for the perfect home coupled with offer rejections and competition leads to buyers lowering their standards unnecessarily. If you are finding yourself fatigued by the property market, step back to remind yourself of your priorities before recommencing your search.
BORROWING TOO MUCH
You need to make an appointment with a bank to fully understand your borrowing potential, and don’t rely on loan calculators which don’t always match what a bank is actually willing to lend you. Home loans are typically easier to get now than they have been in the past years, but that doesn’t mean you should rush into a decision – recruit an independent financial broker to advise you on the best and safest tactics for you.
STRETCHING THE BUDGET
The first thing you need to do once you’ve made the decision to purchase a house is to set your budget and stick to it. Banks set borrowing limits for good reason, and if you spend more than you can afford you might find yourself in a position where your lifestyle is compromised. It’s no good stretching to buy a home outside your budget if you can’t afford to furnish it properly.
UNDERESTIMATING FULL COSTS
A few of the additional costs that buyers often overlook are moving costs, homeowner’s association fees (if applicable), home insurance, flood insurance, stamp duty, transfer fees and council rates. Underestimating these figures can seriously hinder your budget and your ability to make repayments in the short term.
SKIPPING ON BUILDING & PEST INSPECTION
Always hire an independent house and pest inspector to look over your potential new home. Don’t be too troubled by minor faults that are easy to rectify, but do look out for major faults that could cause long-term problems. If you’re finding it hard to discern the seriousness of the reported problems, ask your building inspector to give their honest opinion – they are usually best qualified to pass judgement.
As you can see when it comes to buying a house, there are many things you need to consider before purchasing. The most important thing to remember is to not rush into anything. Always prepare well, research thoroughly, and only then, if you feel comfortable, go ahead and buy the property.