Buying your first home? It’s easy to overlook some small yet important things when you’re excited about buying a house – but you’ll probably regret it later.
When you have a specific house in mind, think about potential developments. For example, if the home is near a busy road, will there be expansion in the near future? If there is a lot of open space around the home, will more homes be built in the area soon? If there are several homes for sale in the neighbourhood, are they selling quickly and who’s moving in? It may be difficult to find concrete information about future developments, but keeping some what-ifs in mind as you look can help you find your ideal home. Also, keep in mind the potential resale value of your future home because no one knows what the future holds and you may need to sell earlier than you imagined.
If you’re serious about buying a home and not just trolling the market, be sure to get pre-approved by your bank or credit union BEFORE you start viewing homes. With pre-approval, you will really feel ready to make an offer when a home feels right, and if there’s heavy competition. You’ll also know exactly what you can afford, which is really the most important thing.
If the home you’re considering was built before 1978, you should seriously consider its potential for lead-based paint. On one of your viewings, take a lead-paint test kit with you to swab a few areas that seem suspicious (flaking, zebra-like chips). You can buy tests for around $30 at a hardware store. If you have time and the ability, also test the water to ensure the tap water doesn’t contain lead.
Most purchase agreements allow for a final inspection of the property to ensure that the house is still in good condition. This might not seem necessary, but if you’re purchasing a repossessed property or displacing disgruntled renters, you may need to ensure that no last-minute damage was done (think writing on walls, stolen appliances, moving out party etc.).
At a certain point, a commute becomes a burden. If your commute is taking valuable time away from your family or personal goals, look for a home closer to your work. It may be worth downsizing to a smaller home instead of losing too many hours out of every workday.
Building inspectors can find a lot of things wrong with a house but they don’t catch everything all the time. Some building inspectors won’t climb on a roof, crawl under the floor or inspect underground pipes and septic tanks – all things that can cost you in the long run – so it’s important to make sure your building inspector comes from a reputable company.
If the home you have fallen in love with was built in the 1950s or ’60s, determine if the wiring has been retrofitted properly. Earlier systems can become increasingly dangerous and unsafe as time passes and could be a fire hazard.
A 2017 survey of 2,200 home buyers and mortgage applicants found that the biggest regret for millennial buyers was they wished they’d saved more money before buying a house. More than 10% of respondents no longer felt financially secure after they bought their home.
Nearly half of the respondents in a survey said they’d do something different if they could. Near the top of the list of things they’d do better the second time around was doing more research. A total of 41% of people who applied for a mortgage felt they weren’t aware of all of their loan options and all of the costs associated with buying a house.
Nearly 20% of millennial buyers and 20% of Generation X buyers said they regretted they didn’t buy a bigger house. However, waiting for the ‘perfect’ home is not always an option. See next slide!
Millennials buying a home for the first time are up against some hurdles, including the deposit and settlement costs. With home prices having spiked, these hurdles become boulders.
“To play in the market, one must get in the market by buying (and hopefully getting a good deal on) a home that is within their immediate financial striking range,” says real estate agent Mia Simon. “This is difficult for some, as they want the three bedroom/two bathroom home where they can envision raising their children. The problem is that by the time they’ve saved the deposit to afford this house, it has appreciated to the point where it is now unaffordable.”
Discover how to make your home look more expensive inexpensively!
“When shopping for homes on online listing services, you’re not really getting the full picture or price,” says a real estate agent. “The home might have smells, sounds or sights that you’re not seeing while looking at the photos on the listing. Not only that, if you’re interested in a home and reach out to the listing agent, they’re not going to have your best interests at heart. They’re legally bound to the seller, so you may not get the best deal.”
Working with a local real estate agent in person allows them to know more about your needs and wants, and gives them the opportunity to work for you to find your future home. You can also appoint a buyer’s agent if you are thinking of buying at auction. They can also find suitable properties, complete background checks and negotiate with the seller – reducing some of your stress.
Finding the home you want is a dream come true. Making an offer and starting the closing process shifts that dream one step closer to reality. Millennials should be mindful that their loyalty by no means belongs to the lender that pre-approved them, however. It’s in your best interest to shop around for the best interest rates and terms that fit your budget.
This is certainly one of the biggest mistakes a buyer can make when buying their first home. Don’t let your real estate agent go to the inspection without you. Do not send your mother or brother or second cousin on the home inspection. Take time off work and walk through the home slowly. In fact, make sure you’re involved with the entire process, including hiring your own personally vetted inspector. Once all is said and done, be sure you read the inspection report!
Most millennials buying their first home aren’t swimming in cash, which is why it’s a good idea for them to make sure to factor in resale value when purchasing a home.
Find something that can build equity, such as new carpeting, hardwood floors, or granite bench tops, and that will also appreciate over time, like the neighbourhood is up and coming – new shops and restaurants are popping up around it. While no one can predict the future, millennial home buyers need to think ahead to what the home they’re buying could be worth when they go to sell it.
It’s easy to look at your mortgage and get caught up in the affordable numbers popping off the page, but this monthly price on the listing doesn’t take into consideration insurance, taxes, land tax, rates and mortgage insurance if your deposit is less than 20%. Do the maths to include these crucial fees to see if you can really swing the house you want with the budget you have.
As much as you shouldn’t wait for the perfect home, it’s also important you don’t commit too quickly. “We typically encounter clients whose number one goal is understandably getting a good deal on their home purchase,” says real estate agent Mia Simon. Try and buy when fewer people are buying – late autumn and winter.
Buying a house is exciting, but it also requires you to factor in stamp duty, legal fees, bank and mortgage registration fees, building and pest inspections, lender’s mortgage insurance (if you’re borrowing more than 80% of the purchase price) and home building insurance. First homebuyers may get stamp duty concessions. According to Sale Ezy, for a property in the $500,000 to $750,000 price range, you’ll need to factor in extra $30,000 for additional costs.
Your first home may need various renovations and repairs, which can drain your bank account quickly. In fact, you may not even have money to do such things at all if you emptied your savings account just to purchase your home! “That’s a growing pain for the first-time homeowner, when stuff breaks,” says banker John Pataky. “They find themselves in a hole quickly.”
A way to get around this is to have a savings fund specifically to cover your deposit, closing costs, moving expenses and repairs.
It’s easy to borrow money from your bank, but it’s hard to pay it back. While it’s tempting to use a loan for your entire deposit, first-timers should be wary of mortgage fees. Your best bet is to create a budget for all home expenses, as well as monthly bills, groceries, insurance, etc, so you have a better idea of what you’ll actually be able to afford for a deposit.
You shouldn’t just love the home, you should also love the neighbourhood. Not knowing the area and feeling unsure about the neighbourhood can be red flags for home buyers. If you think you’d like to buy in a certain neighbourhood, rent first to see if it feels safe and suits your lifestyle.
Since housing markets go up and down, it doesn’t mean that when you’re ready to sell you’ll make money. Appreciation isn’t guaranteed when it comes to residential real estate, so consider the long-term when buying.
Sometimes it’s best to get a second (or third) opinion when looking at a home. A friend or family member may be able to point out things you didn’t see, such as a land drainage issue, easement or that rising damp in the corner of the laundry.
According to a recent analysis from CNBC, the biggest regret of new homeowners is buying a home that is either too large or too small. Whether you can’t find the room you need for your family, or you realise that you’re paying for square meterage you don’t use, having a home that doesn’t meet your needs is a recipe for frustration. Avoid this issue by buying what you actually need, not what you think you need.
Making the shift from renting to owning can be an exciting way to build long-term wealth, but it also carries certain financial burdens. In addition to a mortgage, rates, taxes and insurance, homeowners also need to set aside money for repairs and maintenance. These ongoing expenses are simply part of homeownership. But if your home’s purchase price leaves you with nothing in the bank, you’ll be in trouble if an emergency occurs during your first months of ownership.
Avoid this issue by keeping an emergency fund (also known as a rainy-day fund or savings buffer) – an amount of money you set aside to help cover the cost of any urgent and unexpected expenses. Having a savings buffer means you won’t need to borrow money if a crisis happens and you need money quickly, says SmartMoney. Saving regularly is the best way to build up your savings balance. Set up a separate high interest savings account for your savings to go into via automated payments set up with your bank. You can also ask your payroll office if they can send part of your pay to your savings account. Then you can set and forget, knowing that your savings are growing without you having to transfer them every time you get paid.
Get estimates for utility expenses from the real estate agents or current or former homeowners. It helps to know how much it’ll cost for water, rates, electricity, gas and other monthly and annual expenses before you move in.
Use colourful garage sale stickers or multi-coloured masking tape to match each moving box with its final destination, such as blue for kitchen, purple for master bedroom etc. This not only helps you on moving-in day, but also removalists or friends helping to unload. Buy a few big, permanent markers and label the boxes with their contents. This will help the inevitable opening a dozen wrong boxes before finding the one that actually contains the coffee mugs.
The minute you walk in to your new home, your mind will be racing with things that need to be done. Keep this overwhelming task list at bay by keeping a notebook in a central location and write down every action you or your family thinks of throughout the day. After 24 hours cut the list off, and prioritise each item with a 1, 2 or 3. The first priority should be items completed that week – such as safety concerns, cleaning, unpacking essentials. Priority two should be tasks completed within the next two months, such as organisation, maintenance, and remaining unpacking. Priority three tasks should be non-essentials, but improvements and projects you’d like to complete within the year – renovations, landscaping and large purchases.
It’s a small price for peace of mind. Even if the previous homeowner has handed over their set of keys, there’s no telling who else might still have one. A dog walker, a cleaning lady, a babysitter or family member – it’s easy to imagine someone still having access to your new home, so changing the locks soon after moving in will give you security and peace of mind.
Test all fire alarms, replace batteries and add additional alarms where needed. Purchase a fire extinguisher and establish a fire safety plan early with all family members. Do not rely on the previous owners to keep fire safety up to date.
Buy a filing cabinet or office organiser to keep all documents relating to the house in, such as insurance documents, utility bills, receipts etc. Storing all your household information in one handy place makes life easier for the homeowner and can be a sales ‘plus’ when selling the house later.
It’s good to familiarise yourself with the farthest corners of your home. Check for leaks, bugs, mould and other issues that you should address sooner rather than later. If your crawlspace doesn’t have a vapour barrier, learn how to install one here.
Strange odours occurring in your home? Find out what you can do.
If you don’t have keyless locks, be sure to hide a house key so you don’t get locked out. Consider a location other than under the welcome mat, like in a garden hose or under a flower pot.
If this is your first home, consider what you can live with and what you can’t. Perhaps the kitchen isn’t ideal, but you know a few appliance upgrades will do the trick. You wanted two full bathrooms, but can you live with one and a half? Know your must-haves.
There’s almost no way for a new homeowner to completely avoid buyer’s remorse. The little pitfalls that come with buying a home can be stressful and drive you crazy. The good news is that it’s all worth it! For all of its challenges, homeownership can be mentally and financially rewarding.
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Source: The Family Handyman