Buying a home for the first time can be an exciting yet nerve-wracking experience. You will be accomplishing an important milestone in life but, this will also likely be the largest financial transaction you will ever make.
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Having recently met a first time homeowner who shared with us her rocky journey, we decided to pen down (or rather type down) the mistakes that we often hear from homeowners so you can avoid them too. While this list is not exhaustive of the common house-buying mistakes, I hope it helps to give you a better picture of what you’ll be signing yourself up for.
Tip 1: Underestimating the importance of financial planning
Many first time homeowners make the mistake of not budgeting for the full costs that come with buying a house.
This includes acquisition costs, valuation costs, loan application fees, stamp duties, and mortgage insurance, to name a few, that you will have to account for.
Other than moving costs, you should also be prepared for any additional costs that might spring up along the way. These ongoing costs can build up over time, and for it to not take you off guard, you should always have some spare funds allocated for such situations. Being overly prepared protects you from spiraling into debt.
Tip 2: Over-stretching your dollars
The truth of life: Price doesn’t lie.
The more expensive property will always look more appealing than those within your budget.
It’s human nature to want something a little more than we can afford however, don’t let temptation sway you as this decision will derail your finances in the future.
Banks will only be able to offer you a borrowing limit based on your ability to repay the loan. In Singapore, the borrower’s loan-to-value limit determines the maximum amount one can borrow from the bank.
Over-stretching your dollars leaves you exposed to potential financial shocks, such as a drastic change in interest rates and other changes. It’s best to spend within your means and have extra funds with you to cushion you from any kind of financial surprises.
Tip 3: Being influenced by hearsays
It’s easy to get swept by market trends and forget your own needs.
Sure, there are times when the property market might suit buyers ideally, however, waiting for the “right time” or for prices to go down can cause higher risks for your family’s future.
By relying on the media and trends, it might end up wavering your decision to miss the boat. It’s important to note that these market conditions are often temporary, and not every buyer has the same financial timeline. Don’t let short-term trends determine what happens to you in the long term.
Tip 4: Not communicating with your agent
You want your agent to make you a priority and communicate your wants and needs effectively.
All the more you need to communicate clearly with him.
Be upfront about your wants and needs so that your agent can find more suitable homes, saving you time and energy.
One way of communicating can be to ask questions. By maintaining a good relationship, they will be able to help make your home buying experience more pleasant and stress-free.
Be open and honest throughout the process, and before you know it, you will be ready to move into your dream home. If this is your first time looking for a home, just let your agent know.
Tip 5: Letting your emotions get in the way
Even if you think you’ve found The One, don’t let it be too obvious to the seller’s agents. First time home buyers usually fall prey to the many tricks of sellers.
Some agents are skilled at reading emotions and negotiating the last cent out of potential buyers. Another reason for impulse decisions is because you’re getting tired and desperate in finding a house.
Rather than buying out of frustration or love, pause and don’t let your emotions influence you. There are plenty of houses that you’ve yet to see and there will eventually be one out there that’s the right house at the right price.
Tip 6: Not knowing your loan amount before committing
Many first time homeowners and investors alike will do their financial calculations without first consulting any professional bankers or brokers.
It is not wrong if you know how to do it the right way.
Home loan bankers are well-versed with the formulas and numbers, and they will be able to give you a more accurate estimation of your loan amount, this estimation is also known as In Principal Approval (IPA). Do not feel shy or worried that the banker will be judging you, they have plenty more issues to deal with to be judging your case.
If you are not comfortable going to any banker, ask your property agent for a recommendation. Property agents have connections with bankers from different banks, allowing you to do a comparison of interest rates across the banks.
Tip 7: First time home buyer do not negotiate
Negotiating for the property is serious business and you should use this chance to get the best possible deal for yourself. As a first time home buyer, negotiating can put you in an uncomfortable situation.
If you are buying a home without a property agent, try to gauge what their price expectations are and offer a reasonable quote. Avoid offering a price that is vastly different from the asking price. You should also be prepared to waive certain things when negotiating your property purchase.
Factors such as extended stay, a fully furnished or bare unit, the difference in valuations will also affect the price of the home. Try to use them to your advantage and not give in to a price that’s way out of your budget.
Tip 8: Not reading through the contract
It might sound obvious enough but as a beginner, you might not know where to look. Or even what clauses to take note of that will be a disadvantage for you.
A common mistake homebuyers make is to not have the right protection clauses inserted in the contract of sale. Smart purchasers will request additional clauses to protect their interests besides the standard, “7 days cooling period”.
Don’t be fooled by an agent who says you can change the contract after you’ve signed. The only way to get changes approved is to end the existing contract and renegotiate a new one. This will result in a hefty penalty. Ensure that the contract is mutually beneficial and that you’ve read through all the clauses.
Tip 9: Limiting your options by not looking around
Most buyers place too much emphasis on the style of the house. A home should be where you make it and see if it suits your lifestyle. This limits buyers from only focusing on the aesthetics of the place instead of how much potential value the house has.
You should also take into consideration the neighborhood that you’ll be moving to. It’s more than just shops and restaurants that you see today but what could appear in the future. For example, if you’re planning to have a child in the next few years, you can check if there are any good schools or playgrounds, or parks for kids that are nearby.
Tip 10: Not being represented by an agent
Most sellers have an agent protecting them and advising them whereas, most home buyers tend to navigate through the home buying process alone.
Through our years of experience, we have seen many buyers been forced into the corner by agents or smart investors, with no alternatives but to pay for those avoidable mistakes.
No amount of online research will be able to prepare you for the overwhelming emotions you might feel when searching for a good house that’s within budget or negotiating a price for the first time.
You might have a good working knowledge of the process but what you probably lack is perspective and experience about the market.
The decision you make now will have major consequences that you will have to live with for a long time. Therefore it’s important to protect yourself like what the seller does and have a professional to represent your interests.
Buying a home has its obstacles and stress, but with the right support and advice, your home purchasing journey can be a smooth sailing one.
The above are 10 of the most common mistakes that homeowners make, but as you already might have guessed, there are many more that might be unheard of. If you have any stories or experience to share, do give us a shoutout or leave your comment below so our readers can learn from them too!
Till next time, be safe and don’t forget to follow us on our Facebook page!