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First Home Buyer Mistakes That You Should Avoid

24 Feb, 2022

First Home Buyer Mistakes That You Should Avoid

When you started looking into buying a home, you will easily feel overwhelmed.

There’s so much to understand and process, from selecting the right mortgage to picking the right real estate agent or property consultant, to financially preparing for homeownership. It’s easy to get intimidated. Sometimes, it feels like you are walking into an exam room unprepared!

As a first home buyer, there are so many things that you probably haven’t thought of. Therefore, in this article, we highlight some of the first home buyer’s costly mistakes that you should avoid.

home buyers

#1 Not Getting Pre-Approved First

Home loan pre-approval is an indication that a lender is likely to approve you for a home loan. It is an offer from the lender for a specific home loan, for a fixed amount, based on your current financial situation.

Getting pre-approved by a lender first ensures that you know exactly how much you can spend on a home. It would really be disappointing if you started searching for a home that you cannot get qualified for.

Some of the things that impact how much you are pre-approved for include income, debt balance and credit score. It’s always a good idea to get pre-approval before you make an offer because there are no costs in getting it and it will be valid for up to 3-6 months (depending on the bank or financial institution).

#2 Having a Bad or Low Credit Score

The first thing that a mortgage lender will look at before deciding on your loan approval and interest rate is your credit report.

Your credit score is calculated using information from your credit report. This information is:

  • how much money you’ve borrowed
  • how many credit applications you’ve made
  • whether or not you pay/paid on time

Depending on the credit reporting agency, your score will be between zero and either 1,000 or 1,200. This figure tells lenders how good you are at repaying debts. If you have a low credit score, you will be quoted a higher interest rate because you are a riskier borrower.

Your debt-to-income ratio is another factor that lenders consider when reviewing your credit score. If you have a lot of credit card debt, student loans, car payments, and personal loans, you’re a higher risk and can potentially have a limited borrowing capacity.

Therefore, before starting to look for a home, you should try to fix your credit score. Work on paying off your debt, merging all loans together and avoid taking on more debt.

You can get your credit score and report for free here!

australian credit licence, borrowing limit

#3 Thinking That You Need A 20% Deposit

While saving up for a 20% deposit is the goal for many first home buyers, it’s possible to buy a home with only a 5% deposit depending on your financial situation. This is done through a low deposit home loan, also known as a 95% home loan, which will allow you to secure your dream home and enter the market sooner.

You can maximise the benefit of this 5% deposit option by buying off the plan apartment. As your home is being built, you will have extra time to save for a larger deposit throughout the construction of your property.

However, keep in mind that low deposit comes with extra criteria and costs such as Lenders Mortgage Insurance (LMI) and usually comes with a higher interest rate. Therefore, you might want to consider saving 20% of a property’s purchase price. A larger deposit will save you more money in the long run as a bigger deposit means a smaller loan and you can avoid paying Lenders Mortgage Insurance (LMI). Though a smaller deposit can get you into the market sooner.

The best advice here is that you need to make sure that your home deposit secures an affordable monthly payment that you’re comfortable making each month.

#4 Not Knowing What You Can Afford

Did you know that how much you ‘CAN’ borrow and how much you ‘SHOULD’ borrow may not be the same?

In order to get a clear understanding of how much you can borrow, the first point of action should be to figure out how much you can afford to pay towards your mortgage on a weekly/monthly basis.

This mortgage calculator can help you calculate.

After calculating, you might come up with a figure that you will be able to borrow. Whilst it is tempting to base your capacity to buy the property depending on that amount, it isn’t necessarily wise. Banks calculate your borrowing power by assessing your current income and expenses, taking into consideration the current interest rate.

However, it is not with retrospect to your personal future situations that are bound to vary. To avoid a debt spiral, plan out your possible future life expenses such as a car, university tuition, change in career and so on, then factor them into your decision of how much you should borrow.

real estate agents & mortgage broker

#5 Miscalculating the Actual Price of The Property

The cost of buying a home is not limited to the price of the property!

Buying a property in Australia can get quite expensive. The first thing that you need to save money for is your home deposit. But that is not the only money you will need. Buying and owning a home might involve other hidden costs and ongoing costs that you might not be aware of. These can include:

  • Stamp duty
  • Legal conveyancing fees
  • Lender fees
  • Building and pest inspection
  • Loan application or establishment fee
  • Lenders Mortgage Insurance
  • Valuation fees

Apart from the regular mortgage payments, there might be other costs such as utility bills, strata fees, buying furniture and so on. So, it is important to be aware of the possibility of these costs before buying your first home.

It might be different for different types of properties but it is always worth it to have some extra savings.

#6 Not Assessing the Neighbourhood

Now that you have started your property hunting stage, you shouldn’t think about the property itself only. One of the other things that you also need to think about is the neighbourhood.

Take your time in assessing the neighbourhood and the proximity of the amenities that you are after on a regular basis. Ask yourself these questions:

  • How close it is to work?
  • Does it have shops/schools/parks and amenities around?
  • Is it safe?
  • Are there any new developments in the area?

This will save you time when looking for a property. You don’t want to find the perfect home and then realise you can’t shop nearby or it’s too far to commute to work.

first home buyers

#7 Not Doing a Thorough Home Inspection

It is extremely important to do your home inspection carefully. These inspections might include pest and building inspection that will help you to check the current condition of the property and any potential underlying problems.

In most cases, this is not essential when buying a brand new or off the plan apartments. However, you can choose to do so at your own expense once the apartment complex is complete.

Inspections prevent you from buying a house that has major repairs that need to be made especially if you pay a premium for the house. First home buyers may want to avoid this expense not realising a couple of hundred dollars could save them thousands down the drain in the future.

#8 Not Willing to Compromise

As a first home buyer, you usually have limited funds. Therefore, you must consider your budget as well as what’s really available out there in the property market. Create a list of ‘needs’ versus ‘wants,’ and think about those things before you start house hunting.

Start with your needs first. Is it a good suburb with great growth opportunities? Is it the size of the home? Those are the things that are really going to be important and be open-minded to maybe purchase a home that is a bit further to the CBD or the bathroom doesn’t have a bathtub.

So be willing to compromise and be open-minded. Think big as this home might be of great value in the next 5 – 10 years.

purchase price

#9 Not Knowing about Government First Home Buyer Programs

If you’re buying your first home, it’s important to see if you qualify for the government schemes or first home buyer programs. These programs will save you quite a lot.

Here are some assistance schemes that you can get from the government:

  • First Home Buyer Assistance Scheme
  • The First Home Owner Grant
  • First Home Loan Deposit Scheme
  • First Home Super Saver Scheme

#10 Trying To Do It All By Yourself

Buying a home is no easy feat and the stress of it all can make you miss some vital steps. The most important thing is hunting down the best deals with the best possible property. It is not easy to scan an entire city and become an expert on property investment overnight.

Contacting a property consultant can make the job much easier for you. Here at St Trinity, we are working towards making this crucial time the most beneficial and least stressful for you.

selling agent

All in all

At St Trinity, our property consultants are here to help you along the way and guide you through any uncertain territory.

Hopefully, with this list, you can avoid some of the most common first home buyer mistakes and be well prepared for an exciting home buying process ahead.

Give us a call today at (02) 9099 3412 for any enquiries or click on the link below.

AUSTRALIA PRIVACY STATEMENT

Last updated: August 2020

INTRODUCTION

St Trinity Property Group and its affiliated entities, representatives, agents and related companies (collectively referred to as ST TRINITY PROPERTY GROUP) respect the privacy and security of your Personal Information, as defined below, and comply with the requirements of the Australian Privacy Principles under the Privacy Act 1988 (Cth).

This Privacy Policy explains in general terms how St Trinity Property Group handles your Personal Information. However, it does not apply to St Trinity Property Group’s employee records to the extent they are handled by any of our companies that is or was the employer of that employee in relation to the employee’s current or former employment. Such employee records are generally exempt from the Act and will be dealt with as permitted by law.

You may be able to deal with us without identifying yourself (i.e. anonymously or by using a pseudonym) in certain circumstances. If you wish to do so, please contact us to find out if this is practicable in your circumstances. However, if you do not provide us with the Personal Information we have requested, we may not be able to complete or fulfil the purpose for which we collect the information, including providing our services. By visiting our websites, using any of our services or otherwise providing us with your Personal Information (or authorising it to be provided to us by someone else), you agree to your Personal Information being collected and handled as set out in this Privacy Policy.

WHAT PERSONAL INFORMATION DO WE COLLECT AND HOLD?

Under the Act Personal Information is defined as information or an opinion about an identified individual, or an individual that is reasonably identifiable, in whatever form and regardless of whether it is true or not (Personal Information). The Act also defines a subset of Personal Information as sensitive information (for example health records, racial or ethnic origin, religious beliefs, criminal records).

The types of Personal Information we collect and hold will depend on the circumstances of collection and on the type of service we are providing. For example, when we are engaged to sell a property, we may collect and hold Personal Information from both the seller and potential buyers such as name, address, email address, telephone numbers, employment details and details about their business.

We may also collect and hold certain sensitive information that is reasonably necessary for the provision of our services, including health and criminal records. If you provide us with any sensitive information, you consent to us collecting that information and handling it in accordance with this Privacy Policy.

HOW WE COLLECT PERSONAL INFORMATION

We may collect Personal Information about you directly when you deal with us over the telephone, send us correspondence (whether by letter, fax or email), have contact with us in person, visit our websites or complete hard copy or online forms.

There are also circumstances where we may collect Personal Information about you from someone else. For example, from:
• Market research companies contracted by us to obtain information so that we may improve and market our services;
• Your employer;
• Other agents and valuers who may be involved in the services we provide;
• Property developers who contract us to market properties;
• Publicly available information and databases;
• Any of the companies within the St Trinity Property Group (both local and overseas);
• and Anyone you have authorised to deal with us on your behalf.

We also automatically collect certain information when you visit our websites or our subscribers receive promotional emails from us via cookies and other tracking technology (such as web beacons), some of which may be capable of personally identifying you. Such information includes the type of browser and operating system you are using, your IP address and how you use our websites.
Depending on the type of service you or our customers have requested, we may also seek to collect information about someone else from you (for example, contact details of your solicitor, emergency contact person or tenant). However, you must not provide us with Personal Information about another person unless you have clear consent from that person to do so, told them that their Personal Information will be handled in accordance with this Privacy Policy and directed them to where they can find it.
Regardless of how it is collected, we handle Personal Information in accordance with this Privacy Policy.

WHY WE COLLECT, HOLD AND USE PERSONAL INFORMATION

We generally collect, hold and use your Personal Information for the purposes for which it is provided to us (which will usually be obvious at the time of collection), related purposes or as permitted or required by law. Such purposes may include:
• Acting as agent for vendors or purchasers in relation to the sale of a property;
• Acting as agent for owners or tenants in relation to the leasing and or valuation of a property;
• Project management services;
• Structured advisory services;
• Town planning services;
• Capital allowances services and other consulting services in relation to the property market;
• Administration of our business, such as collection of overdue commissions or outstanding fees;
• Responding to client enquiries and communicating with you from time to time to maintain contact and keep you updated on the services you have requested;
• Forecasting future needs of our services and general quality assurance and training purposes;
• Engaging in legal proceedings and/or enforcing judgments and/or orders;
• Complying with the applicable legal or regulatory requirements and/or orders of competent authorities;
• Providing you with promotional and marketing information, including market research reports, newsletters, event invitations and/or property market information relating to our products and services which we think may be of interest to you; and Any other purpose identified at the time of collecting your Personal Information.

We generally use information automatically collected by cookies and other tracking technology to identify you as a valid user, ensure that no one else can sign on simultaneously with your account from another computer and help us serve you better based on your registration preferences. We may also use cookies to help us facilitate any promotions or surveys that we provide. Third parties whose products or services are accessible on our websites may also use cookies, and we advise you to check their privacy policies for information about their cookies and other privacy practices.

DISCLOSURE OF PERSONAL INFORMATION

We may disclose your Personal Information to third parties as may be necessary for any of the purposes stated in the above section. Such third parties generally include:
Our third party providers, contractors, consultants, agents and/or representatives (such as law firms, banks, financial institutions, insurers, IT providers, mortgage referral services providers and/or wealth management services providers) who provide services to us or on our behalf, including to:
• Conduct valuations;
• Assist with obtaining payment from creditors;
• Operate data centres;
• Conduct market research;
• Provide advice;
• Potential buyers, tenants, conjunctional real estate agents and brokers for the purpose for which the information was collected or for related purposes (for example to complete a transaction on your behalf or provide you with a service that you requested); Anyone you have authorised to deal with us on your behalf;
• Any of the companies within the St Trinity Property Group and their related companies; Government authorities, regulatory bodies, law enforcement agencies, courts, tribunals and/or parties to the legal proceedings where you have consented to this or we are required or authorised to do so by law;
• Debt collection agencies; and/or Any other third parties identified at the time of collection of your Personal Information.

DISCLOSURE OF PERSONAL INFORMATION OVERSEAS

Some of the third parties listed above to whom we may disclose your Personal Information are located overseas. For example:
Our information technology and business process service providers that are located in countries including (but not limited to) the Indonesia, India and Philippines; and Our overseas clients that are located in the same countries as the companies within the St Trinity Property Group.
Our contracts with these parties generally include an obligation for them to comply with Australian privacy law and this Privacy Policy.
However you acknowledge that, by agreeing to the disclosure of your Personal Information to these entities outside of Australia, we will no longer be required to take reasonable steps to ensure the overseas recipient’s compliance with the Australian privacy law in relation to your Personal Information and we will not be liable to you for any breach of the Australian privacy law by these overseas recipients. On this basis, you consent to such disclosure.

ACCESS, UPDATE AND CORRECTION OF PERSONAL INFORMATION

We take reasonable steps to ensure that the Personal Information we hold about you is accurate, complete and up-to-date. However, we also rely on you to advise us of any changes to your Personal Information. If you are able to access your Personal Information by logging on to an account you have with us, it is your responsibility to ensure your information is accurate, complete, relevant and up-to-date.
On request we will provide you with access to the Personal Information we hold about you, including for the purpose of correcting or updating that information, unless otherwise required or permitted by law.
There is no charge for making the request or giving the access to your Personal Information. We will deal with your request within a reasonable period after the request is made.
If we refuse to provide you with access we will provide you with a written notice that, at a minimum, outlines reasons for the refusal and the complaints mechanisms available to you.
If you wish to access the Personal Information we hold about you or to update or correct it, you can either do so by logging on to your account (if you have one) or contact us using the contact details provided below. We will require you to verify your identity and specify what information you require.

SECURITY OF PERSONAL INFORMATION

We take reasonable steps to protect any Personal Information that we hold from misuse, interference and loss and from unauthorised access, alteration and disclosure. For example, we implement IT security procedures including password protection, firewalls and site monitoring and we store your Personal Information on a secure server.we store your Personal Information on a secure server.
However, data protection measures are never completely secure and, despite the measures we have put in place, we cannot guarantee the security of your Personal Information. You must take care to protect your Personal Information (for example, by protecting any usernames and passwords). You should notify us as soon as possible if you become aware of any security breaches.

DIRECT MARKETING

When you register as a member on our websites, you will be given a choice as to whether you want to receive e-mail messages from us, including newsletters, announcements and e-mail communications about our latest news, products or services. To the extent the relevant local law requires us to seek your consent, we will only send such messages to you if you opt-in. If you do not wish to receive direct marketing calls or materials, you may use the unsubscribe facility in the marketing communication or contact our Chief Privacy Officer using the channels prescribed below. Further, as a registered member with us, you can modify your choice at any time by accessing your registered account with us. We will stop using your Personal Information for direct marketing if you so request.

PRIVACY ON OUR WEBSITES

Our websites may contain links to the websites of other entities. If you click on such links, you will be transferred to the websites of these entities. We have no control over, and are not responsible for, the privacy practices of these entities. You should read the privacy policy of these entities to find out how they handle your Personal Information when you visit their websites.

WHAT IF YOU HAVE A COMPLAINT?

If you wish to make a complaint about a breach of this Privacy Policy or the Australian Privacy Principles of the Act you can contact us using the contact details below. You will need to provide us with sufficient details regarding your complaint together with any supporting evidence. Our Chief Privacy Officer will investigate the issue and determine the steps that we will undertake to resolve your complaint. We will contact you if we require any additional information from you and will notify you in writing of the outcome of the investigation. If you are not satisfied with our determination, you can contact us to discuss your concerns or contact the Australian Privacy Commissioner via www.oaic.gov.au.

PRIVACY & SITE CHANGES

St Trinity Property Group may update this Privacy Policy from time to time so please review it periodically for changes. If the changes are significant or substantive, they will either be advised to you in writing or posted on our websites at www.sttrinity.com.au. Your continued use of our websites or services, requesting our assistance or the provision of further Personal Information to us (directly or via an authorised person) after this Privacy Policy has been revised, indicates your acceptance of the revised Privacy Policy.

OUR CONTACT DETAILS

If you have a query relating to this Privacy Policy or wish to make a complaint, please contact us using the following contact details:
• St Trinity Property Group
• Chief Privacy Officer

• PO Box 1235
• Menai NSW 2234
[email protected]

MORE INFORMATION

For more information about the Privacy Act in Australia and protecting your privacy, visit the (external link) website below:
oaic.gov.au