Your first property should be an exciting milestone and one that is remembered for the right reasons. We have identified seven mistakes of the first-time buyer and how to avoid them.
Not Getting a Pre-approval
A pre-approval is a written conditional commitment from the lender to a borrower outlining how much they are willing to lend.
A financial assessment and pre-approval will give you a better understanding of what you can afford to buy. This will avoid disappointment when it comes to putting in an offer. A pre-approval will speed up the buying process and put you in a much better negotiating position by showing the real estate and seller that you are serious about purchasing a property. If you are planning on buying at an auction, you will need to have your finances fully approved before you can make a bid as the sale becomes unconditional at the tap of the hammer.
A pre-approval is often a free service offered by your bank or chosen lending provider.
Not Seeking help from the professionals
Buying a house is likely to be the biggest transaction you will make so it is vital to seek professional advice to aid you in your decision. Property transactions are not simple and what you’re borrowing is a life time commitment. Once the sale is unconditional, you have a legal obligation to the conditions outlined in the Sale and Purchase Agreement and by the lending institution.
During the process, it is beneficial to pursue independent advice from a mortgage adviser and a lawyer. A mortgage adviser can offer nonaligned advice for your benefit as they are not bound by the exclusive products they sell.
Your lawyer will act within your interest to ensure you maintain control of the situation by understanding the legal and financial commitment you are making. Check out our blog on a lawyer’s role in the buying and selling process.
Not carrying out research and having unrealistic expectations
Auckland property prices are the highest in New Zealand and according to this years’ Annual Demographia International Housing Affordability Survey, the fourth most unaffordable in the world. A first home buyer must have realistic expectations of what they can afford to buy. This may mean sacrificing a spare bedroom or off-street parking. Fully research and compare the market so you know what housing are selling for in your chosen area.
Borrowing too much money
You first home should be enjoyed without the crippling fear of not being able to meet your mortgage repayments. There are other costs included in the purchase of house and there will be ongoing financial commitments beyond a mortgage. Only borrow what you need to.
Not factoring in all the costs
Your lawyer and mortgage adviser will work with your short term and long term goals to ensure that are you borrowing what you can afford. A mortgage is the biggest debt on a property, but there will be many hidden costs that the first-time buyer should be aware of. These can include council rates, moving rates, insurance and inspection reports.
Getting too Emotionally Involved
A technique used by the real estate and seller is allowing the potential buyer to ‘mentally move in’. Leave the emotions at the door and consider each home as a practical transaction. Before you allow yourself to imagine the new colour scheme, know exactly how much you can borrow, how much you are willing to pay for the house and what the additional costs will be. If you can’t afford it, move on.
Not carrying out a house inspection
Once a sale goes unconditional, any defects that haven’t been identified and repaired under the Sale and Purchase Agreement become your problem. This could include structural damage, mould infestation and even methamphetamine contamination. If you are serious about making an offer on a house, you must carry out a pre-purchase condition, meth and LIM report. You can request an inspection from the NZ Institute of Building Inspectors here.
Whether you are buying, selling or refinancing a property, MBC Law has the expertise to assist you. Contact us today to make your first purchase a seamless enjoyable experience.