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7 mistakes first-time home buyers make

10 Oct 2019

For most people, buying their very first home is a dream come true but it can also be stressful and overwhelming, and it isn't without potential pitfalls - some of which could impact their lives for years to come.

Being prepared when buying your first home will allow you to save money from the get-go and minimise the possibility of ending up with a mountain of debt.

“Buyer’s remorse is not uncommon among first-time buyers,” says Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty, adding that the best way to ensure the dream doesn’t become a nightmare is to be thoroughly prepared.

“It’s really a case of ‘forewarned is forearmed’, because if you have done your homework and devised a clear plan of action, you can easily circumvent costly mistakes and shop for your dream home with confidence.”

Buying real estate is a lengthy, complicated process so it’s understandable that first-time buyers almost always make mistakes, but, according to Geffen, not all mistakes are equal.

She says many oversights or errors in judgement are easily remedied, while others can significantly impact your life and investment returns.

Geffen says common first-time buyer errors include:

1. Not having a clear idea of what they want

Although most first-time buyers will have a clear idea of the type of home in which they would like to live, many neglect to include other crucial factors in their search, which can seriously impact their lives and cause them to regret their choices.

First-time buyers need to know what lifestyle they want from the area and home they live in. Would they prefer a peaceful suburb or a vibrant environment where there may be some noise at night? 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 they can afford

Most first-time buyers will be required to pay a deposit and apply for a home loan 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 prequalification which not only affords them the peace of mind that their credit record is in good standing, it also arms them with the knowledge of how much they can afford to spend and the type of home loan deal they can expect from a bank.

Work out how much you can afford here.

3. Not factoring the additional costs into the budget

Over and above the price of the property, numerous costs arise throughout the buying process, including some which are upfront, out-of-pocket and non-refundable - even if the deal does not go through, while other costs will only hit your pocket once the sale is concluded.

As a rule of thumb, buyers should allow for between 8% and 10% of the buying price of the property for the additional costs over and above the deposit, but it is essential that they do their homework to ensure they are aware of all the relevant fees and procedures before they even start looking for a home.

4. Not making an effort to clear debt before applying for a home loan

When it comes to getting a bond, 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 home loan 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.

Find out what home loan amount you can afford

5. Not shopping around for the best rate

Many people think that just because they have banked with one institution for a number of years, they will automatically get a better interest rate than from any other institution.

However, this is not the case, and buyers should bear in mind that shopping for a mortgage is like shopping for a car - it pays to compare offers.

One of the best ways to do so is to utilise the services of a bond originator to source the best financing option.

See what you'll pay if you get a lower interest rate

6. Neglecting to check out the neighbourhood in which they want to buy

Your home's location will determine not only the future value of your investment, but will also impact many aspects of your everyday life in years to come because you are not only buying bricks and mortar, but also a lifestyle.

Derelict buildings and boarded up shopfronts are a red flag as they indicate a suburb on the decline, which will affect the growth of your property’s value as well as safety and security.

Your peaceful existence of beautiful views could be marred by major development so it’s always a good idea to check with local planning office if there are any projects in the pipeline for your area.

Don’t underestimate the impact of regular inconvenience on your happiness and wallet. Is there a shopping centre nearby where you can accomplish several errands at once, or do you have to drive to multiple destinations to fill a prescription, buy groceries and have your jacket dry cleaned?

7. Allowing their emotions to influence decisions

The repercussions, which can significantly impact their lives for years to come, include overextending themselves financially because they ‘fall in love’ with a home that is beyond their budget and getting in way over their heads with a fixer-upper that takes up all their spare time and money.


“In addition to arming yourself with knowledge, enlisting the services of a knowledgeable and experienced estate agent is also essential to successfully and seamlessly navigate potentially crippling administrative and financial minefield,” says Geffen.

“It’s also a good idea to show the property that you are thinking of buying to a friend or family member who knows you well and will advise you with your best interests at heart. Being prepared will not only minimise the stress of the process, it will allow you to save money from the get-go and will minimise the possibility of ending up with a mountain of unforeseen debt.”

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