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Top Pitfalls For First Time Home Buyers To Avoid
As a first time home buyer, there are an often overwhelming amount of considerations to take into account. The following guide will explain the worst pitfalls people commonly fall prey to when realising the dream of owning their own home.
Be clear on your budget
The fact is, there can be an alarming difference between what your loan provider says you can afford and what you're actually comfortable paying in addition to your other expenses. It's crucial to have a realistic budget - make a comprehensive list of all your outgoing monthly costs, including loan repayments, groceries, pension plans, travel etc. Also remember to take into account any major annual payments such as insurance premiums and holidays. Once you do the math and subtract this total from your take-home salary you will be crystal clear on what you can afford for your mortgage. It's also wise to use a mortgage repayments calculator when deciding on a loan provider so you know exactly what your monthly mortgage payments will be. Rather than land yourself in trouble by trying to finance a home you can't actually afford, you might want to reduce your ...
... monthly expenses or find ways to increase your income before you go ahead with jumping on the property ladder.
Pre-approval before house hunting
Before setting your heart on a home and making an offer, it's a good idea to get pre-approved for a loan amount. That way you can be sure to have the funds that match the property you're interested in, rather than ending up disappointing both the seller and yourself by signing a contract, only to discover that lenders won't approve the amount you need or want to tie you into an unsuitable mortgage deal. It's also important to understand that even if you have a pre-approved loan amount for your mortgage, it can fall though even at the last minute if your situation changes for any reason, such as for example if you finance a new car. Many people have lost out on a great deal on money by signing a contract that they end up not being able to pay for.
Taking hidden costs into account
First time mortgage buyers are frequently unaware of the added costs involved in financing a home. Fees such as taxes, insurance and closing costs can come as a severe shock to the pocket if you haven't planned for them in advance. Also be aware that unlike renting, when major things go wrong with your home such as a leaking roof or broken boiler, it will be up to you to finance the costly repairs - be sure to have saving in your bank account for these unforeseen events.
Weighing your options realistically
Very few people have an unlimited budget to support exactly what they want in a dream home. Try to be realistic and carefully weigh whether you want to compromise on your property or wait awhile longer until your finances have grown. If you're adamant on buying a property now rather than later, your budget might dictate you having to accept older decor, less space or being located on a busy road. It all depends on considering your priorities carefully.
Keeping an open mind
When shopping for a house, make sure the major boxes are ticked such as suitable space and location, without getting too put off by minor things you can repair later at a reasonable cost, such as replacing the wallpaper and modernising the kitchen. The physical imperfections are often cheaper to improve yourself or even by using a contractor than paying the increased home value to a property in perfect condition down to the smallest details.
Thorough assessment
It's strongly recommended to undertake a professional inspection of the home you want to buy before going ahead and signing the contract. Many first time home buyers have had their hearts and budgets broken by buying a property that looks good on the surface but ends up being a bottomless pit in terms of endless repairs.
Growing the equity of your new home
Property experts agree that if you're on a budget, it's a wise idea to look for a home whose full potential has yet to be realised. By gradually adding value to it through phased improvements, you are building your investment and could eventually sell it at a higher price than you originally paid for, allowing you to buy an even better property at a later stage.
Thinking ahead
To avoid any nasty surprises in the future regarding changes to the neighbourhood, ask the following key questions about your potential new home:
Is your road likely to become a major street or a popular rush-hour shortcut?
What kind of building developments are planned for your neighbourhood?
Is a highway likely to be built near your location?
Have the neighbourhood home values declined and if so why?
The above advice will help you identify the major red flags when shopping for your new home. Secondly, this article should make clear that being realistic about your budget will both keep you out of the red and help you find the most suitable deal when choosing from the range of first time buyer mortgages on offer.
Sean Raston is an economics student and expert in first time buyer mortgages.
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