For many, buying a home is the single biggest investment one will make in one’s lifetime. The process is complicated, and requires some groundwork. Think of it like an exam: the better prepared you are, the better your results will be. Here are five common mistakes that, if dodged, will stand you in good stead.
1. Not obtaining your Approval In-Principle
Source: Holland Fintech
Even before forking out the deposit for your home, you will need an Approval In-Principle (AIP). This is a non-binding agreement with your bank, which will determine the amount you can loan for the mortgage, as well as the tenure. Getting an AIP is useful for two reasons. Firstly, it helps establish just how much you can afford to spend on the property. Secondly, it shows sellers how serious you are in making the purchase. To facilitate a smoother process when applying for an AIP, make sure you have all the relevant (and most up-to-date) financial documents on hand. These include pay slips, bank statements, tax returns and credit reports.
You can read more about AIPs here.
2. Not considering more than one lender
Source: PSC Connect
You may have a lifelong relationship with a bank, but it doesn’t mean you should only look to this bank for a home loan. Also, some folks have the perception that local banks have better rates or packages than foreign banks. The fact is, fees, mortgage rates, and home loan packages vary from bank to bank. Your best bet is to shop around for the mortgage solution that’s best for you. Independent mortgage brokers work with a basket of local and foreign banks, and will be able to help you suss out the right deals.
3. Not engaging a real estate agent to find your home
Source: SG Money Matters
You might be hesitant about paying a real estate agent’s commission, believing in your excellent home-finding skills. And while it’s true that you could easily browse through property listings on a site like this to find your dream home, there’s nothing quite like having professional advice from someone with in-depth knowledge of the market. Real estate agents spend their days working the ground, and the best ones will have an intimate understanding of the homes for sale in your desired location. They can offer tips, insights and market analyses – information well worth the price of their commission.
4. Becoming emotionally attached to a property
Source: Quizzlewire
After searching long and hard, you seem to have struck pay dirt: a property with all your desired attributes, in your desired location. In short, your dream home. You become emotionally invested in it. You make your move, putting in an offer, but it gets rejected. A soul-crushing moment. Or worse: the property is above your budget, but you love it so much that you get caught in a bidding war and end up paying much more than you expected. How do you avoid all this? Simply by broadening your selection to a few properties, rather than focusing on just one. This way, if you lose one, you can just move on to the next.
5. Expecting your home’s value to increase over time
Source: news.com.au
First-time property buyers tend to be optimistic. Not surprising, since a property is probably the single most expensive thing you will ever buy. Having invested much or all of your life savings into this starter home, you hope to turn a profit when you decide to sell it in future. It’s not wrong to be optimistic, just better to err on the side of caution. Home prices fluctuate in cycles, so don’t be surprised if your home’s value actually tumbles after your purchase. Ultimately, you should buy a home to live in, and be financially prepared for maintenance costs such as regular upkeep and repairs.
