It’s easy to get distracted when buying your first home, but rushing into it can lead to expensive mistakes and long term issues down the track. Jeremy Cabral, publisher of Finder.com.au, Australia’s leading home loan comparison website says, “First home buyers need to think carefully about purchasing a property and watch out for common pitfalls. It’s an exciting time and it’s easy to get distracted by all the elements involved in applying for a home loan through to the purchase and move itself. But rushing into it all will inevitably result in additional costs and long term issues down the track.”
Look out for these 5 common mistakes…
1. Borrowing more than you can handle
While homebuyers can be surprised at times at how much money their lender will allow them to borrow, it is worth thinking through the costs of the repayments and whether you can actually afford the maximum offered home loan limit. The maximum offered to you could sink you financially. Use a mortgage repayment calculator to project how much your repayments will be under different borrowing scenarios.
2. Getting emotionally attached to a property
Buying on emotion can be a very costly mistake. While it is perfectly reasonable to love a property, it is worth considering whether it is worth all the money you will be pouring into it.
3. Making an offer on a home without pre-approval
If you make an offer on a home with no idea how much you can actually borrow, it is a major risk that can be costly. A pre-approval is a basic check of how much you can borrow, although this is just an indication.
4. Overstating incomes, understating expenses, over-valuing assets
Lenders require documentary proof of these types of details. If you bluff the first stage of a loan application, you’re only going to be rebuffed when the lender has to verify your details before approval. Lying on a home loan application is actually deemed as fraud.
5. Getting a fixed loan when you’ll shortly need access to credit
If you need access to extra credit, such as for renovations, fixed loans are a complete hindrance. Financing a renovation using a home loan will often require breaking a fixed home loan which can cost tens of thousands of dollars.
What’s your best home buying tip?