Buying a house for the first time is one of the most exciting things that can happen in your life – but it can also come with a few unexpected hurdles to face. After all, it’s not just a case of taking out a home loan and buying a house; there are a few steps to buying your first home. There’s home loan pre-approvals, stamp duty, and inspections – just some of the hidden costs of buying a house.
If you’re a first-time home buyer, here’s what you need to know to make your house-hunting and purchase experience smooth and uneventful.
1. Get Pre-Approved For A Home Loan
Pre-approval is a hugely helpful step in buying your first home, as it allows you to determine how much you can safely borrow and comfortably pay back before you start searching for properties. Pre-approval generally involves you applying for a home loan from a chosen lender, who will make an assessment as to whether you’ll be able to repay the loan. If the lender determines that you are eligible for conditional approval, you’ll be able to borrow up to a certain amount.
Without pre-approval, you very well may end up buying a house that you simply cannot afford to live in. It also helps in circumstances where you might look at a house on a whim, find you love it, and can immediately make an offer, knowing that your lender has approved you for a home loan.
2. Understand Budget Creep
Budget creep is a very real thing that happens when you begin searching for a home. Usually it accompanies conversations such as, “if we spend a bit extra on the house, we can get a second bathroom... and if we spend a bit more, we can live in a neighbourhood within a better school catchment zone…”
This is something that first-time home buyers need to know. Budget creep does happen, and it can lead to you purchasing a home that isn’t truly within your price bracket or a home that doesn’t really suit your needs.
This is a very important step to buying your first home. Many younger buyers, and especially first time buyers, may feel uncomfortable attempting to negotiate the price on a house, but it’s well worth doing – you can potentially save yourself thousands of dollars.
But did you know you can negotiate a price even after your offer has been accepted? For example, if you make an offer on a house and find that, after building inspections, there are significant repairs required, you can attempt to renegotiate the final price of the house.
4. Be Ready For Additional Costs
So, you’ve been approved for a loan, made an offer on a home, and the offer has been accepted. Congratulations! But did you know there are more costs on the way?
Additional fees are one of the hidden costs of buying a house. These can include:
- Conveyancing and legal fees
- Stamp duty
- Mortgage registration fees
- Transfer fee
- Loan application fees
- Mortgage insurance (note that, if you have a deposit of 20% of greater, this fee is waived)
- Council and utility rates (ongoing, per quarter).
First-time home buyers: here’s what you need to know. You can access a number of government grants that will save you money when you’re buying a home. One of these is the first home buyers grant. You can learn more about it here[GR1] .
5. Create A Maintenance Fund
Maintaining a house takes significant effort and funds.
If you’re wondering “how do I prepare to buy my first home?”, we recommend having additional savings set aside for immediate changes you need to make to your home, and continue to put money into a maintenance fund to ensure you’re never caught out.
6. Inspectors Are Your Friend
A great inspector can save you a lot of headaches in the future, as they are able to look beyond the surface of a home and find problems that you had not considered. Though they add extra costs to buying a home, building and pest inspections are invaluable to your home – a good inspector will be able to assess for termite damage, check that the foundations haven’t moved, that you have operating smoke alarms, and much more.
7. Check Your Internet and Mobile Reception
This may sound like a strange thing to consider, but since so much of our entertainment relies on internet services these days, it’s worth checking that the home you’re about to purchase is able to be connected to the NBN. Similarly, homes in hillside areas may experience issues with mobile phone reception.
Your house-hunting journey make take a year or more, but it’s important to know what to look for as this will help you avoid the hidden costs of buying a home. Alternatively, you can look at building a brand new home of your own – talk to us today, and we’ll get you started!