Buying your first home is one of life's biggest milestones, especially here in Bulimba where the property market continues to attract young families and professionals. However, many first time home buyers make costly mistakes that could have been avoided with the right guidance and planning.
Let's chat about the most common first home buyer mistakes and how you can sidestep them on your journey to homeownership.
Not Understanding Your Borrowing Capacity
One of the biggest mistakes first time home buyers make is not properly understanding their borrowing capacity before they start house hunting. Your borrowing capacity determines the loan amount you can access, and this figure depends on several factors including your income, expenses, and financial situation.
Many buyers fall in love with properties outside their price range, only to discover later that lenders won't approve the required loan amount. Before you start attending open homes in Bulimba, it's crucial to:
• Review your bank statements and financial records
• Calculate your genuine borrowing capacity
• Factor in additional costs like stamp duty and moving expenses
• Get pre-approved for your first home loan
Understanding your borrowing capacity helps you focus on properties within your reach and strengthens your position when making offers.
Overlooking First Time Home Buyer Schemes and Grants
Australia offers various first time home buyer programs designed to help you enter the property market sooner. The Home Guarantee Scheme, for instance, allows eligible buyers to purchase with as little as 5% deposit while avoiding lenders mortgage insurance (LMI).
Additionally, first home owner grants (FHOG) can provide thousands of dollars towards your purchase, and some states offer stamp duty concessions or exemptions for first home buyers.
These benefits and packages can save you significant money, yet many buyers miss out because they don't research what's available or don't meet application deadlines.
Ready to get started?
Book a chat with a Finance & Mortgage Broker at LBK Lending today.
Focusing Only on Interest Rates
While securing a competitive interest rate is important, many first time buyers make the mistake of choosing their lender based solely on the advertised rate. This approach can be costly because:
• Variable interest rates can change over time
• Fixed interest rates offer certainty but may limit flexibility
• Interest rate discounts often come with conditions
• Loan features like offset accounts can provide additional value
When you apply for a home loan, consider the complete package including fees, loan features, and the lender's reputation for customer service.
Not Shopping Around for Home Loan Options
Many first home buyers approach their existing bank without exploring other options. This mistake can cost thousands over the life of your loan. Australia has numerous banks and lenders offering different home loan products, each with unique features and pricing.
Mortgage brokers can access home loan options from banks and lenders across Australia, giving you access to banks and lenders nationwide rather than just one institution. This broader access often reveals better deals and more suitable loan products for your circumstances.
Inadequate Preparation for the Application Process
The home loan application process requires extensive documentation and can take several weeks to complete. Many first home buyers underestimate what's required, leading to delays and missed opportunities.
For a streamlined application process, gather these documents early:
• Recent payslips and tax returns
• Bank statements for all accounts
• Details of assets and liabilities
• Identification documents
• Evidence of your deposit source
If you're considering an investment loan application for your first investment property down the track, many of these same documents will be required, so keeping organised records pays off long-term.
Misunderstanding Loan to Value Ratio (LVR)
The loan to value ratio (LVR) represents how much you're borrowing compared to the property's value. Many first home buyers don't understand how LVR affects their loan terms and costs.
Generally, borrowing more than 80% of the property value requires LMI, which protects the lender but adds to your costs. However, some first time home buyer schemes allow higher LVRs without LMI, making homeownership more accessible.
Understanding LVR helps you:
• Plan your deposit requirements
• Understand when LMI applies
• Make informed decisions about loan terms
• Potentially access better interest rates
Rushing the Decision
The excitement of buying your first home can lead to rushed decisions. Whether it's choosing the wrong property, accepting unfavorable loan terms, or skipping building inspections, haste often creates expensive problems.
Take time to:
• Research different suburbs and property types
• Compare multiple home loan options
• Understand all costs involved
• Seek professional advice when needed
Remember, this decision will affect your finances for many years, so thorough preparation is worthwhile.
Applying for a home loan doesn't have to be overwhelming when you have the right support and information. By avoiding these common mistakes, you'll be better positioned to secure suitable financing and find your perfect home in Bulimba.
Working with experienced mortgage professionals who understand the local property market and have access to diverse lending options can help you avoid these pitfalls while maximizing your opportunities as a first home buyer.
Call one of our team or book an appointment at a time that works for you to discuss your first home buying journey and explore the home loan options available for your situation.
