First time home buyer? What you need to know

You’ve endured the rate race and you’ve managed to save up enough money to get yourself on the property ladder. Finally. But before you go hunting for your dream home, take a step back and breathe. Before making what will probably be the most significant purchase in your life so far, consider the following advice first.

Shop Around

When it comes to mortgages, it really pays to shop around. Don’t just sign up with the bank you have a checking account with, but consider one of the following options:

  • Comparison engines. The great thing about using a mortgage search engine is that they can do what’s called a whole-of-market comparison, ensuring you’re given almost all of the products available to the average consumer.
  • Mortgage Broker. Use a comparison engine as a benchmark, then approach a broker to see if they can beat the deal. Brokers are also great for people that traditionally struggle to get a mortgage, such as those who are self-employed.

Do Your Research

Some may consider this an obvious one, but there are plenty of people out there who simply hire a broker and hit snooze on their own brain functions. Don’t be one of those people.

Do your own research to find the best home loan for your personal circumstances. Trawl websites that offer loan advice. Call different brokers and financial advisers to see what they have to say. Don’t take their word for it, but look things up just to make sure.

You Don’t Have to Stick with Your Broker

Many first-time buyers will use the services of a broker to get guidance and (hopefully!) the best mortgage deal available on the market. Before you even sign anything, you’ll potentially spend hours of valuable time with your broker. If you sign on the dotted line, everyone’s a winner. Until you don’t. The broker may react badly to a sudden switch in tune.

Don’t feel guilty if you decide you can get a better deal elsewhere. While brokers will often have access to a wider range of products, it doesn’t mean they can always offer you the best mortgage for your specific situation. Shop around and if you find something better, give your broker the chance to match it. If they can’t do it, don’t feel bad when you walk away.

Sort Out Your Finances

You’ve got the deposit. Your yearly salary qualifies you for a range of products. You’re ready, right? Not necessarily. Before you jump headfirst into this gigantic commitment (25 years is longer than most marriages!), ensure you’ve sorted out your finances.

We’re basically talking bad debt here: high-interest loans and credit cards. Small debts won’t give you any trouble, but if you’re paying a high amount of interest per month it may be worth clearing your debts first.

Don’t Get Blinded by Your ‘Dream Home’

The mistake first-time buyers often make is thinking with their hearts, not their heads. They’ll see a property and fall in love with the idea of it, already fantasizing about moving in, buying furniture, and having a place to call ‘home’. While we’re not saying this is a bad thing, you also have to remember that buying property is an investment.

In short, forget the ‘dream home’ narrative and opt for a more analytical approach. Check whether you’ll easily be able to sell or rent out the house, should your circumstances change. Is it in a decent area? Is it in a big up-and-coming city? Do you foresee prices increasing? If you’re not getting the right financial signals, it may be time to move on.

Buy Below Your Means

This is probably the most horrible mistake we see first-time buyers make: buying a house that’s more than you can really afford (this is not equal to the amount you can technically borrow!) can lead to stress, problems in your relationship, and ultimately foreclosure.

The main advice we can give you is to stay well below the maximum you can borrow. Ensure you can easily afford your monthly payments, building in a reasonable buffer in case of a sudden hike in interest rates. Don’t forget to set aside some of your monthly income for your retirement, a rainy day, and savings.

Do You Need to Buy Now?

Our final piece of advice may be something you don’t want to ask yourself: is now really the right time to buy a home? It may be possible that holding tight for just a little longer may be better:

  • The larger your deposit, the better the rate (usually, anyway). It also makes it far easier to make those monthly payments. If you can extend your down payment from 10 to 15%, for example, it’s likely that you’ll get a far stronger product.
  • What’s happening in the market? If prices are tumbling, it’s time to reconsider your purchase. This is particularly true if you’re buying in an area where there’s not much activity in the first place. You may find it hard to get rid of it in a buyer’s market.

What’s the base interest rate doing? The base interest rate guides how much your mortgage rate will be. In the UK, for example, it’s been extremely low for several years now. However, if rates are high and a decrease is expected, it may be prudent to wait it out.

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    As a first-time home buyer, I find the entire process of buying a home to be really intimidating and I just feel like there’s so much going on all at the same time so I’m really thankful for blog posts like this that provide a ton of useful information. I’m currently in the process of qualifying and applying for my first mortgage through Mortgage Maestro and so far they’ve been really helpful in coming up with the best solution for me. Hopefully, all goes well and I could call myself a homeowner soon.

  3. 3

    Managing and sorting out your finances is one of the biggest hurdles you have to go through if you’re looking to buy your first home. Houses are a huge investment and it certainly is worth the additional costs from renting since houses are going to be your personal property and it will accumulate a significant upscale in resale value. I’m also looking into buying my first home from a reliable developer and you can read more about them on this site. It’s important to do a lot of research, compare your choices (budget-wise), and look into your mortgage rates to make sure buying a new home isn’t such a headache.

  4. 4

    This is straight to the point advice and I love it! Soon I’ll be a first time home buyer and I guess there are a lot of things to consider which I do hope I could digest these in my mind. So far, I’ve already spotted some superb houses especially here in this area. But you’re right as per your last advice I should not make hasty decisions as of this moment.

  5. 5

    Thanks for this article! I’ve been actually eyeing on a residential house developed by Paradise Developments but upon reading this post, I’m definitely reminded to structure and evaluate my finances before making this major decision.

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