7 common mistakes first home buyers make

It can be tempting to borrow every dollar you can from the lender but stop and do some calculations first. Once you know how much you can borrow, consider borrowing a bit less, so you're not stressed about mortgage repayments.  

After all, no one knows what's around the corner, especially these days, with Covid-19 having such an impact on the economy on the one hand and yet pushing property prices higher than they've ever been before. Nothing is certain in life.  

This also means you've got some extra capacity to pay for unforeseen costs that come with property ownership, which is wise given that you don't really know what the new digs are going to be like and what issues you might find until you move in.   

Marty Stanowich has seen it all before. The head of marketing for off the plan property firm iBuildNew says there's nothing worse than buying a home that will be way out of your budget.  

"You'll be offered a spending limit for a reason – so don't settle for something that you won't be able to repay," Stanowich says.

You might think you know how much you can borrow because you’ve used an online calculator, but with lending criteria tightened during the pandemic and without pre-approval, it’s really anyone’s guess.  

Pre-approval is confirmation from a lender about how much you can spend on purchasing a property. This means you can set a price range, create a budget and make some real decisions about what you can spend. 

By getting pre-approved on your loan, you can confidently shop around for the home of your dreams and know exactly how much you can offer.

Real estate agents are overwhelmed by enquiries, and auctions are a full house weekend after weekend.  

Yup, the fear of missing out (FOMO) is alive and well in the booming property market, prompting some first-timers to jump in while prices have been spiralling out of control.  

While it’s anyone’s guess what the market will do next, rushing in can mean that you pay too much, which will mean years of waiting for the equity to be realised in your home.   

Before starting the house-hunting process, meet with a lender or mortgage broker so they can explain exactly how much money you’ll be able to borrow. 

A house isn’t something you purchase on a whim. You need to do some serious research and preparation.   

In particular, if you’re building your new home, researching and being knowledgeable about the home building process is vital, Stanowich says.  

“Research the house you’ve chosen, the neighbourhood, and even talk to the neighbours to get a feel for the type of people that live in that street. Find out what amenities are nearby, public transport, schools, and even the level of crime in the neighbourhood,” he says.

Sure, a house is a big purchase, but that doesn’t mean you should pay more than you’re prepared to.  

“Draining all your savings for the down payment and closing costs of the house is one of the biggest mistakes,” Stanowich says.  

And as exciting as it might be to start buying furniture and appliances on a credit card, he adds that it’s a huge mistake to do this before your loan is approved.   

“The lender’s decision is based on your debt-to-income ratio and credit score. They keep track of your spending right up until the closing day.”

Perhaps the house has had a fresh lick of paint and a freshly planted garden. But it’s what you can’t see that could cause you the biggest headaches.  

A builder’s report will determine exactly what state the property is in, uncovering problems you didn’t even think to look for – or answers to questions you didn’t know to ask.  

These could include structural issues, whether the place needs re-wiring, plumbing issues, a leaky roof or pest issues – each could cost a fortune to fix.   

Be sure to check the builder is a registered builder and that they provide you with a full written report.

Buying a property is a legal transaction, so it's best to have a solicitor or conveyancer handle the paperwork.  

This property transfer process is crucial because they will review the contract and make sure you’re purchasing what you think you are and that nothing has been left unclear in the process.  

A solicitor or conveyancer will also advise on any taxes and fees that need to be paid, ensure the valuation is accurate and work with the seller's representative to ensure settlement of the property.  

Once you’ve stuck to the list above, you can head out and start checking out the market. Good luck!