Buying a home is the most expensive purchase most of us will make in our lifetime. Whether you are about to buy your first home, or are planning to make a move to your next home, it is critical that you inform yourself about the factors involved.

Here is what we see as the most common mistakes Aussie
home buyers make.

Not Setting a Realistic Budget
Choosing the Wrong Property
Choosing the Wrong Mortgage
Not Checking out fully the legal documents
Not Getting a Mortgage Pre-Approval
Forgetting to sign “Subject to Finance”
Failing to perform a building inspection
Paying Too Much for Your Home

1. Not Setting a Realistic Budget

Knowing how much you can comfortably afford will ensure you are looking in the right price range and prevent you from buying a home that will strain you financially and emotionally. People often spend more on a home than they can afford.

Any budget set should include the unforeseen, interest rate rise, job-loss, illness or addition to the family. If the budget has no room to move, you stand a real risk of loosing your home at the first financial hick-up the family experiences.
 

2. Choosing the Wrong Property

Determine your needs, schools, drive to work, shopping, recreation, neighborhood, home renovation and maintenance. It is rare that one finds everything one needs in a home. Generally speaking the house you want is always just a little outside of your budget. Often one has to sacrifice home condition for home location or home size for land size. In the end it is important to keep in mind your goals for the property and choose based on these.
 

3. Choosing the Wrong Mortgage

The key to selecting the right mortgage is to find the loan that fits your personal budget and situation, rather than hoping that your budget and situation will magically conform to the mortgage.
Know what is important. Is it the flexibility in your home loan? Is it paying no on-going fees?

Are you after a fixed or variable loan? It is absolutely no good refinancing today, when you know that you intend to sell your home and buy another one in 6 months (unless of course the loan you obtain now is portable and can be transferred to a different security).
 

4. Not Checking out fully the legal documents

If the purchase contract has any unusual clauses or the property has any caveats/title restrictions – the buyer should know. Failure to obtain timely legal advise, may leave you stuck in a purchase contract you entered “by mistake”.
 

5. Not Getting a Mortgage Pre-Approval

Before you consider making an offer on your dream home, apply for a mortgage pre-approval. This is a good idea for several reasons. Firstly, this is a good time to check on the status of your credit. You may be a victim of identity theft without even knowing about it. If you have a common name, like John Brown, you may have been mixed up with someone else with the same name.

Credit report errors take time to correct. Secondly, your income may not be as straightforward as you think, and lenders might calculate income differently. If you are self-employed, you may have to prove that you have several years of sufficient income to qualify. Thirdly, you may be looking at properties completely outside of your borrowing capacity – this is a waste of time.
 

6. Forgetting to sign “Subject to Finance”

Unless you have obtained formal approval “subject only to valuation” – you need to sign all property purchase contracts “subject to finance”.

Not doing so may result in you losing your purchase deposit and being unable to settle on the property you have tried to purchase. Pre-Approval is only an indication of the amount you will most likely qualify for. Do not sign any unconditional contracts based on this document.
 

7. Failing to perform a building inspection

A decision to buy a home is often made after spending just half an hour looking at the property. Isn't it worth ensuring you will not be surprised later with deficiencies costing thousands? To prevent such surprises you need to ensure that adequate expert advice is obtained about the structural condition of your property.

It may be that the existing building will not be able to support a second storey and you are buying the property specifically with this in mind.

Worse still you may find out after the purchase that the house requires thousands of dollars in further repairs. A buyer armed with this information is able to formulate a purchase price that takes the required repairs into account.
 

8. Paying Too Much for Your Home

Not knowing the market could cause you to purchase an over priced home. You should research the local market to determine the values that comparable homes have sold for, and make your offer based on that information.

If you are not familiar with a particular suburb or location – take your time to understand it.


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