Buying a home is a stressful undertaking for all buyers, least of all the first home buyers, who have a number of unique characteristics. From searching for suitable properties, competing with other buyers and getting approved for a loan, there are a number of factors that first home buyers need to familiarise themselves with before buying.
Before taking the property plunge, it's essential that first home buyers understand their local market, have a good understanding of their financial capacity, and know how to complete the necessary checks and balances to protect themselves. These factors are explained more below.
1. Understand the Local Market
Before buying always do your research. Don't believe all of the hype about 'up and coming' suburbs; instead crunch the numbers yourself. These include capital growth figures over the last 10 years in areas where you are considering buying. This will enable buyers to determine whether the suburb is experiencing a boom and where it sits on the property cycle. Don't assume that suburbs with slower growth will continue to underperform; they may just be at the bottom of the property cycle and overdue for a growth period.
If some of the more desirable suburbs are out of your budget, consider purchasing in adjoining suburbs that are more affordable. In time they will likely to enjoy the 'halo effect' of the more exclusive suburb.
Another good measure to gauge the investment potential of where you are looking at buying is the supply and demand. If there is plenty supply available in the area where you are looking at buying, prices should be lower, but so will future capital growth. Where possible, aim to buy where there has been traditionally limited demand. Sometimes this can mean making sacrifices or buying an apartment instead of a detached home, but to ensure the home will be a strong investment, it can be well worth it.
2. Understand How Much You Can Spend
It might sound obvious but too often first home buyers look at properties that they will struggle to afford. Before you start the search, get pre-approval for a home loan so you understand how much you can borrow. Always leave enough capacity for circumstances changing and factor in all costs including council rates, potential rate rises, stamp duty and lenders insurance if borrowing more than 80 per cent of the home's value. Buyers should seek advice from a financial expert and not necessarily a mortgage broker, who may have a vested interest in signing up buyers to a specific loan.
It's also important to know when to walk away. Understanding how much a home should be worth based on the market, rather than your own emotional attachment towards the property, will help prevent first home buyers overcommitting at auction or overspending.
Understand How to Complete Due Diligence
Before buying, all buyers need to know what to look for that could severely affect the value of their home and the resale potential. There are a number of checks here. If buying land to build a new home, the soil profile, slope and gradient should be assessed since this influences the cost of building on the land. Also check if there are any easements of the property affecting where you can build.
Check the flood and fire risk, and always complete a pest and building inspection to ensure the home isn't hiding damage between the walls. This can give buyers power to walk away or renegotiate to reduce tens of thousands off the asking price.
If buying an apartment, buyers should understand the full fees and levies that may be stipulated, and also if there is likely to be future maintenance on the building for which they will be liable for. A strata report will detail this. Before exchanging contracts always get a solicitor to look over the terms and explain any terms that may not suit, leaving the buyer in a position to renegotiate.
The more information a buyer has before going into any property purchase, the better chance they'll make a solid and prudent investment decision. For first buyers who may not be familiar with all the ins and outs of buying property, getting professional advice and conducting extensive market research before buying is absolutely essential.
For more information, contact a business such as Donley Real Estate.