10 mistakes first home buyers make – and how to avoid them

How exciting you’ve you decided to embark down the road of home ownership! You’re probably finding that everyone is giving you advice whether you want it or not….from your parents, friends, work colleagues and anyone else you ask.

Whilst you’ll receive loads of advice on what to do, we wanted to share some of the pitfalls – some of the things you should avoid.

Don’t know your credit history

Not looking at your credit history report before you approach a lender is a mistake. This is the most important document that lenders will look at to determine how much they are willing to lend you…or if they will lend to you at all.

To avoid this pitfall, purchase a credit report which will give you a basic history of your financial activity. Approximately 1 in 10 Australians have a negative listing, which may stop them from getting a loan. Knowing where you sit before you meet with a lender gives you the opportunity to improve your score should you need to.

Not getting pre approval

Having an idea how much a lender will lend you is important, but if you don’t have pre-approval and know exactly how much you can spend it may mean you miss out on the perfect property because you don’t have your finances in place. Without pre-approval you can’t confidently put a bid in at auction or make an offer on a property without the panic of a last minute rush.

Pre-approval essentially is an approved loan amount (usually for a particular time period). Knowing this enables you to set your price range ceiling for yourself and confidently make offers on a property you want to buy.

Not choosing the right home loan

With so many home loan options around, don’t get distracted by deals that look too good to be true….because the often are. The team at LJ Hooker Home Loans can help you find a home loan that suits you and your individual situation. They are a valuable resource to tap into even before you begin to hunt around for a property, as they can help you create a realistic savings plan and something to work toward.

Make sure you are clear on the interest rates, the home loan features, do you need to pay lenders mortgage insurance and what fees apply to the loan.

Borrowing too much

Many first home buyers feel they should borrow to their limit but this can be a problem. While on paper it may appear that you can service a loan that takes you to the top of your borrowing capacity, but who knows what may happen in the future. You also need to ensure you have enough money to pay for the extra costs that come with owning a property and yes you’ll want to have a bit on the side to enjoy yourself…like money to go to dinner, movies with a friend or perhaps even a holiday.

When working out how much you can borrow – borrow less than you can afford to pay back and you’ll be a lot less stressed.

Not getting a pre-inspection report

Some properties come with a whole lot of “issues” that are not visible to the naked eye and easily missed by a first home buyer who may not know what to look for. Common problems such as structural issues, electrical, wiring and plumbing problems, roofing and leaking issues and pest issues can cost a fortune to fix – and you’ll find yourself throwing money after money trying to fix it.

So even if the property price seems perfect and you think the property looks great when you are inspecting it yourself – that’s not enough…Make sure you get a professional pest and building inspection report to understand exactly the condition of the property.

Not understanding the additional costs of buying a property

Not being aware of the hidden costs of buying can be a major issue when you are two thirds of the way through the purchase and you are hit with a multitude of costs. When budgeting add an extra 5-7% of the purchase price to help cover you.

Getting too emotional

You may have found ‘the’ property, the one that ticks all your wish list…but stay calm, don’t show too much emotion at the open home, don’t give your position away to other buyers. It’s good to keep your cards to yourself as it may help you with negotiation down the track.

This also applies to buying a property at auction. Make sure you know your maximum spend threshold and stick to it. Don’t get emotional and spend over your limit.

Not utilising the first home owners grant

Every state and territory offers some significant incentive for first home buyers. Whilst they vary across the country – you could be eligible for tens of thousands of dollars via your states First Home Owner Grant. Make sure you do your research and ensure you meet all the criteria before applying.

It is worth looking into the First Home Buyer Super Saver Scheme that helps you save money via your Superannuation fund. For more information click here:

Not getting a solicitor or conveyancer to review the contract

Buying a property is a legal transaction, whereby the seller transfers the title of the property over to the buyer for an agreed sum of money. This transfer is an important part of the process and not using a conveyancer or solicitor to review your contract, to ensure you are buying the property you think you are, without unknown issues and that you understand the terms and conditions of the sale is critical.

Before you sign the contract of sale it’s very important that you find a solicitor or conveyancer to review it. They will research the property to find out if any title work needs to be done, they will take care of taxes and fees and ensure the valuation is accurate. They will help handle questions you may have with the agent and sort through all the legal paperwork. Don’t skimp on this step – it is really important!

Not doing enough research

Rushing in and buying the first property you see without doing any research into the national and local market, the neighbourhood and even the street is a mistake. Knowing how much similar properties are selling for in the area is important so you don’t pay too much. Knowing what the neighbourhood and street is like is important so you don’t end up buying in an area that you end up hating. Your local agent have local market reports that can help you understand the market, plus attending multiple open for inspections and auctions will all help ensure you become a bit of a property expert. Use our handy inspection checklist and keep notes on why certain areas offer higher prices than others…don’t rush into any purchase you might forget.

Also make sure you spend time researching your property by reviewing the building and pest inspection report we mentioned above – all of this is building up your knowledge on the property – and knowledge is key to finding the right property for the right price.

Are You a First Time Tenant and Need a Reference?

If you understand why references are required, you can tailor your application to rent accordingly – even if you’ve never rented before.

Demonstrating you are a good tenant

Are You a First-Time Tenant?

Many Australians choose to rent for a period of time before buying a house. However, if you’re an individual who hasn’t rented a property before, you may feel a bit stuck without references from previous landlords.

However, everyone has to start somewhere. The good news is that you can still demonstrate that you would make a good tenant.

If you understand why references are required, you can tailor your application to rent accordingly – even if you’ve never rented before!

What is a Reference?

A reference is simply a letter or document that vouches for your ability to meet your financial commitments, be depended on and can be trusted.

A reference needs to be written by someone that is associated with you ideally this would be a previous/current landlord but alternatively can be written by your boss, colleague, roommate or even your neighbours.

The purpose of a reference is to provide your potential future landlord an idea of who you are and what they can expect if they were to have you as a tenant at their property.

A Sense of Security

Landlords want to keep their investments in good condition. While they have certain obligations when it comes to maintenance, some responsibility falls on the tenant, too.

For instance, you will need to keep a property in clean and tidy condition as a tenant. Whether you’ve been living under your parents’ roof or in a student hostel, you’ve likely experienced rules relating to general household tidiness at some point or another.

You’ll need to ensure your bathroom gets appropriate airflow to avoid mould, tidy up any spills and avoid damage to the flooring, walls or fittings.

Your landlord will also appreciate being informed of any maintenance issues that arise in a prompt manner. For instance, if you notice a leak, be sure to get in touch with them straight away. This allows them to remedy any problems in a timely manner, both for your own enjoyment of the property and to avoid a problem compounding into a bigger issue.

How to Obtain Property as a First-Time Renter

Even though you haven’t rented a home before, it’s still possible to rent a property for the first of time.

While references from previous landlords are requested, that’s not to say you can’t demonstrate your trustworthiness in other ways.

You need to show that you can pay your rent on time, take care of the property and meet the terms of the tenancy agreement.

If you can show that you’re responsible, tidy and have a good history of paying bills on time, you’re on track to renting your first home. Even though you can’t provide a reference from a previous landlord, there are plenty of other documents that can put you in good steed.

For instance, verification of your employment or regular income assures your landlord or property manager you’ll pay rent on time, while a record of regular mobile phone bill payments are also helpful.

If you’ve been living in a student hostel, you could offer a reference from the complex manager.

References from your employer or manager can demonstrate your sense of responsibility, while references from teachers, neighbours or even your doctor can help bolster your application.