So, you have decided to get your hands on your first home and you are all excited and energised at the prospect of owning your very own piece of brick and mortar. Before you can get the keys to your much awaited property, bear in mind that you’ll have to go through a number of important steps and there is also the possibility that you will make mistakes – which of course we are here to help you avoid. So before you get swept away with the romance of it all, have a look at the most common mistakes we have put together below, together so you can avoid falling in the same trap!
1. Fall in love before your financing is approved
There’s nothing wrong with looking at houses before the time, but use this time to compare houses, their prices and educate yourself about the market rather than setting your heart on a specific one you want to buy. Get pre-approved by your bank for a home loan amount as soon as you can as this will paint a realistic picture of what budget you qualify for. This will stop you from looking at houses you cannot afford and pre-approval will also show you are serious about buying a house, to both the bank, a seller and their agent.
2. Not shopping around for a home loan
The bank you have always been dealing with should have your best interests at heart, but do get quotes from lenders, as this can save you literally thousands over the repayment term of the loan. Interest rates will differ from one lender to another and even a small difference means a lot when you talk about compound interest!
3. Being unrealistic about your budget
Don’t go for something you can barely afford! Overextending yourself is a very bad idea and also make sure that you have some savings squirreled away to cover a few month’s repayments should you fall on hard times in the future. Don’t go for the maximum loan amount the bank has qualified you for, as additional hidden expenses can very quickly get you into murky waters financially, even from the start.
4. Decimating all your savings
Always make sure you have an emergency savings fund of at least 6 months’ living expenses at all times. It is very tempting to empty all your cash into putting down a bigger deposit on your dream home, but this will put you at risk as you will be living on the edge with no safety net. Always, always have the savings amount as advised above available, just in case.
5. Being impatient and hurrying the process
The buying process is a drawn out one with loads of fine details, so getting impatient about it is very tempting…but don’t, as this could be costly. Plan carefully ahead for post the purchase and save, save, save as much as you can beforehand. There are things like deposits, commissions, notary fees and more that needs to be paid before you can take ownership of your new home and all of these upfront costs are not likely to be included in the initial home loan amount you have been approved for or got granted. Should the worst happen and you have a poor credit rating on your hands and you subsequently get turned down for a loan, it can take years to dig yourself out of debt and repair your tattered reputation. Be patient, no matter how long you have to wait.
6. Going on a credit binge during the process of applying for a home loan
The whole world is connected these days and the paper trail of your spending is there for any lender to see, in fact many years of it. Banks or lenders will check your credit record during the whole process and especially before the moment of deciding to award the home loan, so be disciplined and keep on paying all bills and try and get all outstanding balances on credit cards and clothing store accounts as low as you can, or even better pay them off in full without jeopardising your savings as discussed before.
7. Choosing the best house in the worst neighbourhood
This is a fundamental mistake and one of the worst you can make. We are all guilty of our eyes being bigger than our stomachs, but every estate agent knows that it is better to always go for the worst house in the BEST neighbourhood. You will always be able to upgrade and better the house, but there will be little you can do about a bad neighbourhood. Choose an area that suits your family values, is close to work and schools, have access to public transport and most of all, the right kind of neighbours. There is nothing worse than living somewhere in a nice house but in an area that you hate! Plus investing modestly in a better area will sooner make you money than the other way round.
8. Buying with your heart instead of your head
Buying a house is a major life event, even more so if it is your first one. It is a long-term commitment and expensive, so be clear-headed and unemotional. Falling in love with a property can cloud your judgement and you may overlook important details and always remember that you do not own it as yet. Don’t overshoot your budget, don’t get seduced by buying a “looker” in the wrong part of town. Also go and see the property a few times, at different times of the week and day to get a clear picture of what you are letting yourself in for.
9. Being too “good” to apply for government concessions
The government has made available some unbelievable assistance programmes for First-time Buyers: loans up to €175,000, zero or very low guaranteed interest, reductions on stamp duty and more. This is not designed for the poor, it is designed for the wise and you will be a fool for not making use of it as it will save you thousands of euros in the long run!
10. Waiting and then waiting some more for “just the right home”
As a First-time buyer you have to accept that this is your initial step onto the property ladder. Buy wisely and unemotionally and if you have to fix up a thing here or there to make the home perfect for you to live in, then do so. Waiting forever for the right home that is perfect will more than likely never happen. This can be just as bad as paying too much for a property that leads you into territory of overextending yourself financially, just because your “standards are that high”. Be realistic about everything: your budget, the property and doing it sooner than later. If you wait too long you may just miss out on buying a really good investment
11. Overlooking or ignoring hidden costs
Besides the home loan that you have to start paying back, wait until you see the hidden costs such as insurance, utilities, repairs, maintenance and the like! Make absolutely sure you have taken these costs into account when you calculate what you will be looking at forking out each month. As we said before, buy for less than your maximum loan amount allows for and have those rainy day savings available just in case.
12. Not building up enough courage to be tough when it comes to negotiating
Many people are embarrassed to ask for a discount on anything. When it comes to buying your first home, be brazen regarding all aspects of the process: ask banks and lenders for better interest rates or shop around for them, ask the estate agents what they can do to help and negotiate, negotiate! If you don’t ask, you don’t get! For instance, a loan calculated over a 20-year period, benefits from a massive amount of savings when the interest rate is dropped by a mere percentage point.
The Bottom Line: Not getting professional help from an estate agent
There are tonnes of reasons why you should get the help of an estate agent. They have the experience and can guide you through the whole process (and you get to avoid any of the above mistakes). They will know what properties are available on the market and will also negotiate the price on your behalf. They can also help pull strings at the bank and make you aware of any hidden costs or issues that a property might have.
Henry Ford once said that it proves that you’re smarter than they are when you hire people who are smarter than you. The trick is to recognize when you need help and to find the right person – someone like Frank Salt Real Estate for example, who has been doing this for more than 50 years