Amidst the excitement, frustration and sometimes overwhelming anguish, it’s quite easy to overlook the crucial elements contributing to a successful first home purchase.
Inexperience is the common denominator amongst first home buyers, more so associated with failing to realise the sneaky costs that multiply by the thousand. Preparing for the mammoth task ahead saves you more than dollars, it also eliminates stress and time-wasting activity.
If you don’t adequately allow your budget to cover these extra expenses, you’re going to have a terrible experience – and buying a home should be full of happiness and positive emotion!
Let’s take a look at the seven most important factors people tend to forget about whilst on the home buyer’s journey.
1. Loan Pre-approval
Loan pre-approval is the most crucial, first step of the process confirming a realistic figure that you’re eligible to borrow. This preapproval is not only a budgeting tool, but shows you’re not another time-waster and you’re serious about making a purchasing commitment.
2. Stamp duty Tax
The number of first home buyers that don’t understand, or allow for stamp duty when making budget calculations is alarming. This is usually because this tax is paid till the process is finalised and the property settles.
A percentage of the purchase price must be paid as a stamp duty tax when purchasing property in Australia. It is recommended to allow at least 3% of the purchase price to cover stamp duty tax.
3. Lender’s Mortgage Insurance
Another misunderstood costs is Lender’s Mortgage Insurance. This only becomes an expense if you’re planning to borrow more than 80% of the property’s value.
This is designed to protect the lender in the event that you default on your mortgage. If you don’t wish to take out an LMI policy, in most cases you’ll be required to save a significantly larger deposit.
4. Contract of Sale
The Contract of Sale is the document that makes it ‘real’. The terms in this contract must be overseen by a property law expert, a conveyancer. Before going ahead and literally signing your life away, ensure this document is reviewed, deciphered and explained properly to you.
This also provides peace of mind knowing that no hidden terms or nasty surprises will unexpectedly pop up in the future.
This is the legal transitioning process between the vendor and buyer directly leading to the settlement.
As well as often being difficult to get your head around, conveyancing fees are generally hefty too. It’s common for first home buyers to seriously underestimate this expense and importance of this stage of the buying process.
6. Statement of Adjustments
Prior to settlement, a conveyance will draw up a statement of adjustments. Some expenses may have to be adjusted depending on the specifics, and nature of the sale. This could mean saving money, or unexpectedly forking more out – another expense to be considered.
7. Professional Inspections
Remember, looks can be deceiving. This means although a home may tick all the boxes from standing on the front lawn, a professional inspection may prove otherwise. Professionals can uncover things that you may not see when emotion begins to cloud your judgement.
Not to be discouraging or burst your bubble, but professional property inspections, sometime numerous, are imperative before making any decisions.
As mentioned before, buying your first home can quickly become the most overwhelming experienced of your life. Whether it’s in terms of a positive or negative one depends on your own degree of preparation.
Consult an expert to confirm you’re all set to begin your journey, and secure a hassle-free, successful purchase.
For more helpful information, read our First home buyer FAQ’s.