A mortgage broker has revealed the most common mistakes first home buyers make when looking to purchase a home.
Robert Roper, director of Trusted Finance in Perth, told Daily Mail Australia home buyers often search for properties ‘blindly’ without consulting a lender or without knowing their maximum borrowing capacity.
Mr Roper said it’s essential to determine how much you can afford based on your lifestyle and monthly expenses, and whether this will change in future by having children.
‘It’s so important for first home buyers to know how much they can afford to borrow and to consider their future goals that may cause financial stress,’ he said.
Over the past few months Mr Roper has gained a strong following of more than 22,000 people on TikTok by sharing his trusted information in short videos.
Robert Roper, director of Trusted Finance in Perth (pictured), told Daily Mail Australia home buyers often look at properties ‘blindly’ without consulting a mortgage lender or without knowing their maximum borrowing capacity
Mistake 1: Failing to research suburb data
Mr Roper said first home buyers have a tendency to set their intensions on specific homes without researching the suburb data.
Considering the history, current data and opportunity of a suburb of interest can be helpful to understand the price range houses usually sell for.
Mr Roper suggested conducting between three to six months of research on the suburb by making use of real estate websites, gaging how long properties are on the market for and finding out how much the home sold for.
‘If you can’t find how much a property sold for online, call the real estate agent directly to ask – they are usually more than happy to disclose the information,’ he said.
Mistake 2: Not knowing how much you can afford
Prior to searching for properties on the market, it’s vital to know how much you can afford per week in comparison to how much the bank is willing to let you borrow.
‘Just because the bank is offering you a $800K mortgage, doesn’t mean you have to take the maximum amount,’ Mr Roper said.
He added how more frequently first home buyers are often ‘persuaded’ to reach their maximum borrowing capacity, or more, due to the competitiveness of the market.
For instance, if you know a house has already had several offers you are more likely to increase your own in order to place the highest amount.
Prior to searching for properties on the market, it’s essential to know how much you can afford per week in comparison to how much the bank is willing to let you borrow
Mistake 3: Failing to contact a mortgage broker or borrowing lender
Rather than going straight to the bank to ask how much you can borrow to purchase a property, Mr Roper strongly suggested speaking to a mortgage broker who will consider a large variety of options.
Mortgage brokers compare several banks and the interest rates to determine which one would be optimal for the customer.
‘Different lenders have different policies, so a mortgage broker will determine which bank is best for you and your goals,’ he said.
Mistake 4: Not considering the future
Mr Roper said regardless if you’re single or in a relationship, young first home buyers should consider their future, whether they want children and how soon you would like to start a family.
‘Having a baby and starting a family changes everything financially, because one person is often the primary caregiver and would need to stop working for a period of time,’ he said.
‘This often causes financial strain on the couple and may impact their mental health.’
For this reason, it’s optimal to buy a home with an asking price that is less than your maximum borrowing capacity if possible.
It’s also worthwhile considering what might happen if properties in your suburb drop – as this will impact the value of your home if you were to sell.
Rather than going straight to the bank to ask how much you can borrow to purchase a property, Mr Roper strongly suggested speaking to a mortgage broker who will consider a large variety of options
Mistake 5: Not considering added costs
In addition to the deposit, buyers also need to pay further costs when purchasing a property – though this is often forgotten.
These costs include stamp duty, bank fees, strata and lenders mortgage insurance.
Lenders mortgage insurance (LMI) is the one fee that can be avoided if a deposit of 20 per cent or more is paid upfront.
According to ANZ, lenders mortgage insurance protects the lender in the event that the home owner defaults on the home loan and there is a ‘shortfall’ of money.
Mistake 6: Not including a building and pest inspection into your purchase contract
Another fatal error that can lead to additional costs is not checking if the property purchase contract includes a building and pest inspection.
‘Most real estate agents do the right thing and always ensure this factor is incorporated into the contract, but it’s always worth checking,’ Mr Roper said.
If the building isn’t inspected property and the building has defects, the buyer has to pay for the damage if they already signed the contract.