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10 Common First Home Buyer Mistakes (and How to Avoid Them!)

Updated: Jan 7, 2021

Buying your first home doesn’t have to be stressful. To help you out, we have rounded up some of the most common home buyer mistakes and how to avoid them. This guide has everything you need to know about how to buy a home.

From overspending to not taking advantage of low-interest rates, we’ll go over the most common mistakes of first-time home buyers. Follow these tips and save yourself a lot of money in the long run. Let’s jump into these first home buyer tips.

How much house is too much house before you can't house the house?

1. Not Knowing How Much House You Can Afford

Before you buy a home, it’s important to look at your finances. You want to know how much house you can afford before you start the process. As a first-time buyer, your first step should be to lay out your budget and expenses.

To start, layout all the income you have coming in. Next, write down all your expenses. Your fixed expenses are things such as your car payment and your student loans. These are expenses you likely can’t cut out.

From there, you can write down your additional expenses. Things such as music subscriptions, gym memberships, and the internet. Once you have a clear picture, you’ll be able to see what you have left each month for a mortgage payment.

You’ll want to estimate your affordability this way instead of your gross income. After taxes and benefits, you don’t always have your gross income coming in each month. You also can’t include money that’s already allocated to other bills.

From here, you can speak with a mortgage broker about your options. They will want to know your additional expenses to get a better idea of what you can actually afford. The 30% rule is a good place to start.

With the 30% rule, you’ll want to only have your housing expenses by 30% of your income. During a free consultation, you will get professional advice on financing, real estate options, as well as new government programs and incentives.

2. Taking on Too Big of a Fixer-Upper

Never hurts to look at more than one company

It’s tempting to try and fix a home yourself as you see on television. It isn’t always as easy it appears, however. While you may fancy yourself as a do-it-yourself warrior, renovations are expensive.

If you want to tackle a house with renovations, you’ll need to come up with a budget and a plan. Fixing a home is a great way to build equity and increase the value of your home. If your dream home isn’t in your price range, it’s also a great way to get into the area you like.

As a first-time homebuyer, you don’t want to spend your whole budget on the house and run out of money for the improvements. It’s often helpful to speak with a contractor before you purchase the house to get an idea of the costs.

Make sure to leave plenty of wiggle room in your renovation budget. Unexpected repairs or costs always come up. The bigger buffer you have, the better position you’ll put yourself in.

If you aren’t particularly handy, a new construction home is a great option. With the new development, you won’t have to renovate anything. You can move right in and enjoy your new home.

3. Not Shopping Around for Mortgage Rates

As a first-time buyer, the mortgage process can be overwhelming. Make sure to do a little homework and shop around for rates. Taking the first offer you get could cost you interest and other fees. In Malaysia, interest rates are at record lows. You can take advantage of these savings.

Try out a couple of mortgage companies to see who is the best fit. Your realtor can often suggest someone they know and trust. The lower your interest rate, the less expensive your mortgage payments are.

Yeah I can take another loa-- wait

4. Not Looking at Your Credit Report

When you apply for a mortgage, your lenders will look at your credit report. You don’t want to wait until they pull your credit to find out what is. Your credit score is largely what determines your interest rate.

You can pull your own credit to see where you stand. Before you shop for a mortgage or a home, take some time to improve your credit score. Make sure to pay your bills on time and pay off your balances.

The less debt you have, the higher your score will be. Use this time to cheque your reports for errors as well. If something is on your credit that shouldn’t be, call to get it removed. Disputing charges will get them off your credit report.

Even small changes can improve your score quickly. Your lenders will take your debt-to-income ratio into account to approve you for a mortgage. You’ll have to be under a certain threshold of debt to income to qualify.

Your debt-to-income ratio also affects your credit score. The lower your ratio, the better loan terms you’ll have. Less debt also means more money for your mortgage payment and savings.

Are you going to eat rice and kicap for years to come just to repay the loan? (Source: ICANCOOK on Youtube)

5. Putting Too Little or Too Much Down

While 20% has long been the standard for down payments, this isn’t always the best option for everyone. If you plan on flipping the property or only living there for a short period of time, a lower down payment could make more sense.

If you are doing any renovations, it may also be more cost-effective to save money for construction instead. Putting less down will leave you more money for renovations.

If you put too little down, this can also cost you more in the long run. With your first home, you have more room with this number. If you own multiple properties in Malaysia, your down payment requirements will change.

With new construction, you won’t need to factor in renovation costs. With a Seri Pajam Development, take advantage of the opportunity to buy a new home with zero percent down. Many of the closing costs and fees are also included.

Oops (Source: Giphy)

6. Miscalculating Additional Fees

In addition to the mortgage, there are also fees and costs associated with buying a home. Before you buy, put money aside for a deposit, inspection, and appraisal.

When it comes time to close, a new home in a Seri Pajam Development will include some of your closing fees. This is a huge savings opportunity.

You’ll want to budget for your move as well. Factor in the cost of a moving truck and movers if you need them.

After you move, set a budget for home supplies and furniture. Shopping for home decor is always a fun part.

7. Using all Your Savings

One of the best things you can do when buying a home is to go under budget. Keeping some money back for expenses, furnishings, projects, and savings is key.

You’ll also want to make sure you have an emergency fund to fall back on. Depending on your financial situation, three to six months is ideal. If an unforeseen expense comes up, you want to still be able to pay your mortgage.

8. Opening New Credit Before You Close

In the weeks before closing, you won’t want to open up any new lines of credit. This could raise red flags with your mortgage company. If you open up a new credit card or buy a car, your lender will know about it.

9. Looking for a House Before a Mortgage

Before you start seriously looking at homes, you’ll want to get pre-qualified for a mortgage. While it’s great to start looking and touring, before you make an offer, you need to know what you can afford.

Seri Pajam Development is offering a free consultation and free credit screening. Get in touch here to take this important first step to homeownership.

With interest rates in Malaysia being so low, now might be the perfect time to look for a home and a mortgage.

10. Not Taking Enough Time to Explore a Neighbourhood

The neighborhood or development you choose is an important decision. Take some time to explore and make sure it’s the right fit.

If you’re looking for a property top developer, spend some time at the development to look at the amenities. You’ll want to feel at home wherever you choose. These great developments are designed with you and your lifestyle in mind.

How-To Avoid These Common First Home Buyer Mistakes

Knowing how to avoid these common first home buyer mistakes can save you a lot of money. As a first-time homebuyer, getting your finances in order is one of the best things you can do.

Knowing what you can afford and what your goals are will help you avoid several of the most common home-buying mistakes. If you’re ready to start exploring some beautiful new developments, fill out the contact form here to get in touch. You’ll be one step closer to your dream home.

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