5 first-time home buyer mistakes and how to avoid them

Planning to buy your first home? Congratulations. We are sure you are quite excited, and a bit nervous, too. Indeed, traversing the complicated world of mortgages, all alone, for the first time, could feel daunting. However, with a little bit of planning and foresight, applying for a mortgage could be a breeze.

Top 5 mistakes to avoid as a first home buyer

Go through this list of common yet avoidable first home buyer mistakes to start your home loan journey with confidence:

  1. Underestimating the purchase costs – Buying a home is often more expensive than simply putting down the purchase price. In addition to the sale price, there are several hidden expenses that could cost you dearly.

    We recommend that you set aside at least five per cent of the property price to cover accessory costs such as stamp duty, inspection costs, legal fees, insurance premium, loan setting up fees, etc. Of all these costs, stamp duty is the most expensive, running into several thousand dollars. Luckily, as a first home buyer, you might be eligible for stamp duty concessions in your state. So don’t forget to visit your state’s website for the most updated information on first home buyer grants and discounts.

  2. Not knowing how much home you can afford – Buying a home that is too expensive could lead to financial stress in the future. Therefore, besides knowing what the lenders are willing to lend to you, it is vital to work out the size of the loan you can service comfortably. Note that this number could be less or more than the amount pre-approved by your lender.

    But how do you figure out how much home you can afford to buy? The answer is simple. Plan a household budget and calculate how much money you can spend on a mortgage each month to work out the size of your mortgage backwards. Ideally, you should not be putting more than 30 per cent of your salary to meet your monthly home loan repayments.

  3. Skipping the pre-approval process – When you apply for a pre-approval, lenders analyse your income, credit, and other financial aspects to determine whether, and how much, they are willing to lend to you. Thus, once pre-approved for a mortgage, you can shop around with confidence, knowing how much you can afford to spend on a property. Especially at an auction, it is foolhardy to bid without a mortgage pre-approval as you might fail to procure the funds when it comes to completing your purchase.

    Getting a pre-approval is quick and free of cost. Your pre-approval is valid for up to three months and comes with a rate lock, which means, you pay the same rate of interest if you finalise a property within the stipulated period, even if the rates go up. Of course, you can choose a lower rate if the interest rates happen to go south.

  4. Saving money on property inspections – A building inspection may cost you a couple of thousand dollars, but it’s money well spent, say experts. Having a property inspected can bring potential problems such as structural defects, water damage, or pest infestations to light that could lower the value of the property significantly. Besides, when discovered after purchase, these issues can be quite expensive to repair. Prior knowledge of such defects could help you negotiate a lower rate for the property before purchasing it.
  5. Not comparing home loans – As you might already know, no two home loans are created equal. Consequently, when you take out a mortgage, it is essential to consider the interest rate as well as additional features to choose one that is tailored to your requirement.

    Fortunately, the mortgage market is flooded with great deals from banks and non-bank lenders vying for new customers and trying hard to retain the existing ones. Therefore, it makes sense to compare home loans from several lenders before settling down on one to ensure you get the best possible rate on your mortgage.

    Wondering where to start? Visit a home loan comparison site such as HashChing to compare home loans from over 80 lenders across Australia. Unlike other websites, HashChing features broker pre-negotiated home loan rates that could be as much as one per cent lower than lender advertised rates featured elsewhere.

There’s help at hand!

Buying a home is a major decision that will affect you financially and emotionally for years to come. A good home loan, however, can make a significant difference on your journey by ensuring flexible repayments and other terms that are well-suited to your financial condition and vision.

Still feeling confused?

First home buyers could benefit immensely by working with a mortgage broker. Your mortgage broker is a financial expert who not only works hard to get you a better rate but also doubles up as a financial advisor who can guide you to the right financial product for your situation.

Did you know that nearly half (48.6%) of the mortgage broker customers who obtained a home loan in the past five years were Millennials?

Don’t feel shy of seeking help. Have your home loan queries answered online by verified HashChing mortgage brokers.

By Vidhu Bajaj,
HashChing Content Writer


HashChing is helping Australians by providing access to pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.

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