In this article we consider 10 Mistakes First Home Buyers Make when purchasing their first home. At Brisbane Home Loans, our specialists are experienced at working with First Home Buyers and over the years, have identified mistakes first home buyers make and established a program that assists in avoiding such mistakes. Take the time to read the article and supporting articles as it will help you immensely in your journey to your first home.
1 UNDERESTIMATING YOUR BORROWING POWER
It is important to ensure you have a realistic understanding on what your financial position will allow you to purchase. Many first home buyers will become entangled in the excitement of owning a dream-mansion in a high-profile suburb, leading some to disappointment when this becomes unattainable.
An important step in purchasing your first home is to know what you can afford to borrow which is determined by your ability to make regular repayments on your home loan. Establishing your maximum lending capacity is fundamental to avoid disappointment.
2 MISSING OUT ON THE BENEFITS BRISBANE HOME LOANS CAN OFFER
Another mistake first home buyers make is trying to do it alone.
Many first home buyers are daunted by the prospect of making the largest financial commitment of their lives, and many falsely believe that they must navigate this process on their own. Generally, first home buyers are guided by parents, family, and friends. Online research can also sometimes assist but often can make things even more confusing.
Reaching out to a professional mortgage broker is another way of wading through the minefield. Brisbane Home Loans is focused on helping first home buyers early when they start to save for their deposit. They understand the challenges faced by First Home Buyers and they break down the process to make it easier to understand. Brisbane Home Loans offers first home buyers, and online database of useful information published by professionals in their specific fields. They also offer seminars, and online help lines where first home buyers can ask questions.
Find out here how engaging Brisbane Home Loans will help first home buyers understand the buying process, save money, and ease the daunting process and hopefully avoid a mistake first home buyers make in Brisbane.
3. NOT UNDERSTANDING ALL THE COSTS INVOLVED
Purchasing your first home involves costs which often you may not be aware of. This can delay your purchase or introduce challenges that can result in lost money. Understanding and planning for the costs involved in purchasing your dream loan is important to save and budget accordingly.
You can avoid being blind-sided by unplanned fees by seeking information from your Mortgage Broker early.
This article from Brisbane Home Loans, provides a good understanding of costs associated with purchasing a new home.
4. NOT BEING AWARE OF ALL THE INCENTIVES AVAILABLE TO FIRST HOME BUYERS
Never have Australians received more incentives to purchase their first home as the Government increases grants available to first home buyers. This is evident in the report by realestate.com which states that: “first-home buyer confidence has hit an eight-year high”. This is due largely to the range of concessions and grant schemes introduced as incentives by the Australian Government.
Realerstate.com.au has reported a 40% increase in first home buyers this year versus last year which is evidence that first home buyers are responding to the opportunity created by Government incentives.
Listed below are several incentives that either result in grants being provided to First Home Buyers which in Brisbane can be up to $40,000 and in rural Queensland as high as $45,000. There are also incentives that reduce the cost of purchasing a home such as the stamp Duty Exemption. First home buyers need to familiarize themselves with these incentives and establish which ones are applicable to them.
- First Homeowner’s Grant
- Home Builder Grant
- LMI Insurance protection
- Stamp Duty Exemption
- First Home Loan Deposit Scheme (FHLDS)
Do not miss out on these opportunities to save THOUSANDS.
5. TRYING TO BUY THE PERFECT HOME
The contrast between getting into the market or buying the perfect home is always a deliberation for first home buyers. On the one hand, we ideally want our first home to be the perfect house that has everything we want. On the other hand, the longer we wait to raise the deposit to buy the perfect home the more expensive it becomes.
Depending on your saving capacity and access to money, you may need to set your expectations at a practical level that allows you to enter the market and redirect your rental money to your own mortgage.
This is even more relevant given the additional incentives available to First Home Buyers which may or may not be available in the future.
Ensure that you set realistic expectations that are aligned to your income, saving capacity and ability to meet the mortgage repayments. If in doubt consult our specialists at Brisbane Home Loans to guide you in establishing a realistic figure specifically for you.
6. OVERESTIMATING HOW MUCH DEPOSIT YOU NEED
Thanks to the fantastic range of incentives available to First Home Buyers, having a 20% deposit for your property is no longer a minimum requirement.
Discussions with your Mortgage Broker will help you understand your financial position and how you may be able to utilise the Australian Government’s First Home Loan Deposit Scheme to allow you to take out a loan with just a 5% deposit.
From July 1, 2020 the National Housing, Finance and Investment Corporation (NHFIC) will release
10,000 new spaces on the First Home Loan Deposit Scheme (FHLDS). The FHLDS was introduced in January 2020 to allow first home buyers earning less than $125,000 individually, or $200,000 for couples, to apply for a loan with a deposit as little as 5% of the property price.
Under the scheme the Government will guarantee the remaining 15% of the deposit for properties priced under $475,000 in Queensland capital cities and $400,000 in the rest of the state (each state will have their own designated price caps on properties).
The NHFIC website provides a tool for understanding if your area is deemed to lie within a capital city or regional area.
By reaching the total 20% deposit requirement, this means that First Home Buyers under the FHLDS scheme will no longer be required to pay for Lenders Mortgage Insurance (LMI).
This article by Brisbane Home Loans explain more so you can avoid a mistake that first home buyers make:
7. NOT KNOWING HOW TO MAKE AN OFFER
It is important that first home buyers are aware of the do’s and don’ts when it comes to making an offer on a property. Getting this wrong can be costly to say the least. Prior to making an offer on a property, first home buyers should have a good understanding of the standard practices used in the real estate industry.
To avoid one of the common mistakes first home buyers make, Brisbane Home Loans has compiled as list of considerations which can give you the best opportunity in securing your perfect house.
8. NOT HAVING THE RIGHT CONDITIONS IN YOUR PURCHASE CONTRACT
Once you sign a contract there is a cooling off period where you can crash the contract, however there is a cost to this so tread carefully! But once the cooling off period is over, you are locked into the contract and the terms of the contract.
Some agents may suggest to you that you can change your contract at any time. Do not believe that for one minute. Ensure that you have your contract reviewed by a qualified Lawyer and that you understand any conditions included in the contract.
Where you as a buyer, you have a need for your own conditions, you must also ensure that these conditions are correctly included in the contract. For example, if you are waiting for some money to become available to make a deposit payment, then the timing of this payment should be reflected in your contract through conditions.
Ideally, you should have identified a good Lawyer that will review your purchase contract before you sign it.
A.L.F. Lawyers provides a great explanation of the importance of contract conditions here
For more information about cooling off periods, read more here
9. NOT UNDERSTANDING WHEN TO PURCHASE HOME INSURANCE
Another common mistake first home buyers make is not getting insurance cover for their property when they first sign the contract.
Many first home buyers are not fully aware of the correct timing to purchase home insurance for their property. Arranging insurance on your property is the first thing you should do after entering a purchase contract.
Discover our tips on home insurance here.
10. OVER-RELIANCE ON ONLINE CALCULATORS
One of the first time home buyer mistakes to avoid is to use online calculators as the only source of information.
Online calculators are fantastic in providing First Home Buyers with a very broad idea of how much they can afford to buy, as well as providing an estimate of mortgage repayments. Unfortunately, these calculator systems are often highly inaccurate. Some cases have seen estimates provided by online calculators being $100,000 different to what the same bank will lend.
The best way to find out how much you can borrow is by chatting to our team at Brisbane Home Loans and if applicable we can guide to a loan pre-approval which can give you confidence to purchase up to a nominated price and know that the money will be available from the lender. Contact us today!
