The idea of owning a second home can be incredibly appealing. It could be a holiday house or an investment property that can generate additional income. But is buying a second home the right decision for you? Let’s explore the key considerations and steps involved in purchasing a second property in Australia. Top Reasons for […]
7 Common Loan Mistakes to Avoid as a First-Home Buyer
By Deltos Finance on August 7, 2023
Purchasing your first home is undoubtedly an exciting milestone, but it may also come with its fair share of challenges. For one, you have to navigate the complex world of home loans, which can lead to potential mistakes that could impact your financial well-being. But by recognising and avoiding common loan mistakes, you can ensure a smoother and more successful first homebuying experience. It will also be a great help if you have an expert team of mortgage brokers by your side.
Today, we’ll shed light on seven common loan mistakes first-home buyers should steer clear of. By heeding these tips and expert guidance, you’ll be better equipped to make confident and informed decisions on your path to your first home ownership.
1. Ignoring Loan Pre-Approval
Let’s start with one of the most common mistakes of first-time home buyers: house hunting without obtaining loan pre-approval. Pre-approval is a crucial step that involves the lender evaluating your financial situation to determine how much they are willing to lend you. That way, you are aware of your borrowing capacity. In turn, you can narrow down your property search to homes within your budget.
Skipping this vital step can lead to disappointment and unnecessary delays. Plus, most sellers may prefer offers from buyers with home loan pre-approval, giving you a competitive edge in a competitive real estate market.
Tip: Get pre-approved before you start your house-hunting journey. This way, you’ll know exactly what you can afford and be ready to make an offer when you find the perfect home.
2. Overlooking Loan Comparison
With the excitement of becoming a homeowner, it’s easy to rush into accepting the first loan offer you receive. But you should be careful not to. Failing to compare mortgage products can result in missed opportunities to secure better interest rates, loan features and repayment terms. Remember that different lenders offer various loan options, each with its unique benefits and costs. So spend ample time conducting a thorough loan comparison to find a loan that best suits your financial needs and goals. Doing so may save you thousands of dollars over the loan term.
Tip: Utilise online loan comparison tools or speak to an experienced mortgage broker in Hobart to compare loan options from multiple lenders. Consider factors such as interest rates, loan fees and repayment flexibility when picking a home loan.
Be sure to understand your best mortgage options before submitting an application. Submitting multiple applications in the search for the best mortgage can negatively impact your credit score.
3. Neglecting Credit Score
We won’t beat around the bush: your credit score plays a vital role in loan approval and the interest rate you’ll receive. Neglecting your credit score and its impact on your loan eligibility can lead to loan rejections or higher interest rates, affecting the overall affordability of your home loan. So regularly monitor your credit report and take proactive steps to improve your score before applying for a home loan.
Tip: Obtain a copy of your credit report and review it for errors or discrepancies. Want to boost your credit score? Paying your bills on time, settling outstanding debts and saying no to new credit applications can improve your credit score.
4. Underestimating Additional Costs
First-time home buyers often fixate on the property’s purchase price but forget to consider the additional costs involved in buying a residential property. Expenses such as stamp duty, legal fees, loan establishment fees and inspection costs can add up significantly. Neglecting these costs in your budget can lead to financial strain and hinder your ability to settle the property.
Tip: Research the additional costs associated with buying a home in your desired location and include them in your budget. Seek advice from professionals, such as conveyancers and mortgage brokers, to understand all the expenses involved.
5. Borrowing to the Maximum Limit
While it’s tempting to borrow the maximum amount offered by lenders, doing so can strain your finances in the long term. Overstretching your budget could lead to difficulty meeting repayments, limiting your financial flexibility and impacting your lifestyle. So before you get excited about borrowing the maximum amount, consider your current and future financial commitments, such as career prospects, family plans and emergency funds.
Tip: Create a comprehensive budget that takes into account not just your mortgage repayments but also other living expenses, savings and potential future financial needs. It’s wise to leave some buffer in your budget to accommodate unexpected expenses.
6. Neglecting a Home Loan’s Fine Print
What are the other first-home buyer mistakes? One is related to the fine print.
Review and understand the loan’s fine print before signing it. Pay attention to any hidden fees, exit costs or changes in interest rates over the loan term. Otherwise, failing to read and comprehend the fine print can lead to unwelcome surprises and potentially costly consequences.
Tip: Engage a mortgage broker who can guide you through the loan terms and conditions, ensuring you understand all the details and potential implications. They can help you identify hidden costs or unfavourable terms and recommend other loan products that suit your preferences better.
7. Failing to Seek Expert Guidance
Shopping for the right home loan can be overwhelming, especially for first-home buyers. Without expert guidance from a reputable mortgage broker, you’re likely to make uninformed decisions that may not align with your long-term financial goals. Buying your first home is a life-changing decision; it can be a make-or-break for your financial future. So don’t think twice about engaging a seasoned mortgage broker. They have the knowledge & network to find suitable first-home buyer loans, explain the intricacies of loan terms and assist you throughout the application process.
Tip: Consult with a mortgage broker early in your home buying journey. Their expertise will streamline the loan application process and provide valuable insights into the latest mortgage products and market trends.
Let Deltos Finance Guide You
As a first-home buyer, awareness of common loan mistakes is the key to unlocking a successful and stress-free homeownership journey. Avoid these pitfalls, such as neglecting loan pre-approval, overlooking loan comparison, or underestimating additional costs, and you can make more confident and informed decisions.
Partnering with a knowledgeable mortgage broker, like Deltos Finance, can also be a game-changer. Our team is ready to provide expert guidance and tailored loan solutions that align with your financial needs and aspirations. So, make your first home buying experience a positive and rewarding one by sidestepping these common loan mistakes and taking charge of your path to homeownership.
Ready to start your first home buying journey? Contact Deltos Finance today.
Enquire Now
Find Your Perfect Finance Solution
Let's discuss your finance needs. We’re here to help.
More posts from Deltos Finance
How to Use Equity to Buy Another Property
As a homeowner, you’re sitting on a valuable asset that can do more than provide a roof over your head. Your property’s equity can be a powerful financial instrument to help you buy a second home or expand your real estate portfolio. So, whether you’re dreaming of a holiday home by the beach near Carlton […]
What to Know About the Home Loan Approval Process
Understanding the home loan approval process and knowing what to do at each stage can make it less intimidating. Today we’ll guide you through the stages, including what to do before lodging your application, when to apply, important considerations, and the support and tools available to make the process smoother. Before You Apply: What You […]
Cash-Out Refinancing: Tapping into Home Equity
As a homeowner in Australia, you may have built up significant equity in your property over the years. But did you know you can tap into this equity to access cash for various financial needs? This is where cash-out refinancing comes into play. In this article, let’s explore what cash-out refinancing is, how it works, […]
No More Stamp Duty: Tasmania’s Gift to New Homeowners
Imagine stepping into your first home without the burden of thousands of dollars in stamp duty. Sounds too good to be true? Well, for Tasmanian first-home buyers, this dream has now become a reality. The Tasmanian government has just delivered a game-changing gift that could save you up to $28,945 on your first home purchase. […]
The Australian Shared Equity Scheme Explained
These days, it’s not easy to break into the property market. That’s especially true for young and first-time homebuyers who encounter several obstacles, especially amidst rising inflation and interest rates. But don’t fret because there are ways to make homeownership more accessible and affordable. One of which is shared equity. The Australian shared equity scheme […]
Let’s Talk About Rentvesting in Australia
You might find the traditional path to homeownership challenging, especially with rising property prices in desirable areas. Plus, it usually takes an average Australian over five years to save for a home loan deposit for a median-priced residential property. Enter rentvesting—a strategic approach for getting a foot on the property ladder without compromising your lifestyle. […]
Redraw vs Offset: Which Should You Choose for Your Home Loan?
When taking out a home loan, you might focus too much on comparing rates and terms. We’re here to remind you to explore different home loan features before signing the dotted line. Two popular options that can help you save on interest and pay off your mortgage faster are redraw facilities & offset accounts. But […]
Let’s Talk About the Expanded First Home Guarantee Eligibility
Have you heard of the First Home Guarantee scheme? Did you know its eligibility has expanded to include more aspiring homeowners who previously faced barriers to entry into the property market? Today, let’s talk about the expanded First Home Guarantee eligibility to help you know whether you can maximise this scheme. A Refresher: What Is […]
The First-Home Buyers 5% Home Loan Deposit Scheme Explained
As a first-time home buyer in Australia, one of the biggest hurdles you’ll face is coming up with a substantial deposit. Traditionally, lenders have required a deposit of at least 20% of the property’s value, but what if you could secure your dream home with just a 5% deposit? That is possible through the First […]