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Shop for your dream home with confidence | 9 common mistakes to avoid
Category Property News
Even the darkest cloud has a silver lining and, in this instance, it's the rare combination of a record low repo rate and a very bearish market affording first-time buyers an excellent opportunity to get a foot on the property ladder. Here's how to make a good investment if you keep your wits about you.
There hasn't been a better time to enter the market for many years as investors are also spoilt for choice in every price band.
However, favourable market conditions don't mitigate the potential pitfalls and, unfortunately, buyer's remorse is not uncommon amongst first-time buyers, usually as a result of neglecting to do their homework and ensure they are thoroughly prepared.
It really is a case of 'forewarned is forearmed' because if you have a clear understanding of the process and what is required and have devised a clear plan of action, you can easily circumvent costly mistakes and shop for your dream home with confidence, even during a pandemic.
Now, more than ever, it's essential to have experienced property professionals onside to guide buyers, especially those who are purchasing for the first time.
Ironically, some of the measures recently implemented because of lockdown actually engender better communication and closer interaction between clients and agents than before the pandemic. And, with many of the administrative processes now being digital, there is less margin for error than when dealing with reams of printed documents from various sources, especially for younger buyers who are already comfortable with all things digital.
That said, almost every aspect of the process, including property viewing being virtual at the moment, it's even more critical for inexperienced buyers to be aware of what boxes need to be ticked to make a wise investment choice and evade the pitfalls.
The following are common first-time buyer mistakes:
1. Not having a clear idea of what you want
Although most first-time buyers have an idea of the type of home in which they would like to live, many don't realise that there are other critical factors to consider which will impact their daily lives for years to come and they could end up loving their home but hating their neighbourhoods.
Would they prefer to live a peaceful, suburb area or a vibrant environment with nightlife? Do they need to be close to work or schools or would they prefer to be in close proximity to a social entertainment hub? Do they have time to take care of a garden or would a lower maintenance option suit their lifestyles better?
2. Not being sure of what you can afford
Most first-time buyers will be required to pay a deposit and apply for a bond for the balance and unless they have an idea of how much banks are willing to lend them, they are literally shooting in the dark.
The best way to do this is by obtaining pre-qualification which not only affords them the peace of mind that their credit record is in good standing, it also arms the them with the knowledge of how much they can afford to spend and the type of bond deal they can expect from a bank.
See what home loan you could afford
3. Buying more 'house' than you can afford
It's easy to be tempted to buy a home that might stretch your budget, but overextending yourself is never a good idea as you risk losing your home if the unexpected happens and you fall on tough financial times. You'll also have less wiggle room in your monthly budget for other bills and expenses.
4. Moving too fast
Buying a home can be complex and rushing the process can cost you later on as you may not be able to save enough for a deposit and the associated costs, address items on your credit rating or make informed decisions.
Take the time to map out your home buying timeline well in advance - at least a year, if possible, bearing in mind how long you will need to save money, repair poor credit etc before you can apply for pre-approval.
5. Not making an effort to clear debt before applying for a home loan
The two most critical requirements are a good credit record with a track record of repaying contractual debt responsibly and being able to afford the monthly bond instalment.
One of the key factors that banks take into consideration when determining affordability is an applicant's income-to-debt ratio, so it's advisable to start reducing debt as soon as they even start to think about buying a home.
Author: Lew Geffen Sotheby's International Realty