RECKON YOU’VE FINALLY found your dream home? Well, it should just be a matter of reaching an agreement with the seller via the estate agent, once you’ve gotten your bank’s approval, right?
Wrong. It’s often a lot more complex than that.
During a home-buying journey there are several potential financial obstacles, and in his work as a financial advisor and analyst for Irish Mortgage Brokers, Karl Deeter has seen them all.
Here are seven costly pitfalls you should avoid as a first-time buyer…
Make sure that you’ve researched all the offers (and all the properties) on the table before you commit to one. Deeter suggests that talking to as many people as possible about the process and mortgage options can give you an idea of what to brace yourself for and what to expect:
One of the worst things you can do is to become embedded in only one property or to have only one financial option. It closes down the number of choices you have and it can all fall through.
Broadening your options is central to ensuring that your transaction goes smoothly, says Deeter:
It’s about quantity, not quality – mortgage loans are debt and debt doesn’t come in a particular quality. The rate and the price can be different but the quantity is always the same. By having options from different places, you have control if one falls through.
Reckon it’s a matter of just paying out a fee to your estate agent once you find your dream place? They’re not the only stakeholder you’ll meet along the way, warns Deeter.
“People quite often have a view that it’s me and the estate agent buying a home,” he says. “But don’t forget your broker, house insurance company, life insurance company, your solicitor, the selling party, their solicitor, structural surveyor, possibly a valuer…”
There are a lot of experts involved in securing your property purchase, and each one usually comes with a fee, so saving a little extra is key. “Put aside all the money you can because you will encounter plenty of unexpected costs along the way,” says Deeter.
Although finding the right home takes time, you should be prepared to move as quickly as you can through each step of the process.
“If you get a mortgage approval, it doesn’t last forever. The clock is ticking,” says Deeter, adding that mortgage loan offers typically have a six-month time period.
Even if the loan approval doesn’t run out, the lending rules can change as the months go on, as Deeter warns. “One client of mine waited too long to make a bid, and by the time they took the leap, they didn’t qualify anymore,” he recalls.
Putting their own stamp on an old building is something that many buyers aspire to, but Deeter warns that choosing a house that needs a lot of additional investment may make it more difficult to get a loan – especially as a first-time buyer:
A lot of people dream of a clapped-out shed being turned into a rustic farm-style home, but that kind of property would actually be very hard to get lending for. Types of property can change your lending capacity and whether you’re able to get a loan for it or not.
Even when you have your heart set on a particular property, know when to walk away. Don’t follow a property into your own destruction, warns Deeter – and whatever you do, don’t go over the amount you’ve been approved for:
If you’ve gotten your maximum approval and you’ve made a higher bid than you should have, the bank will probably say no. Your maximum is your maximum.
One of the most common mistakes when it comes to mortgages, says Deeter, is not understanding how you manage your financial affairs:
You might think you’re saving €2,000 but then you’ll dip into your savings. Or you’ll overspend one month and have an overdraft charge.
Even small charges or overspending will earn you negative marks with the bank. Start understanding how banks see you rather than how you see yourself, and you’ll be on a better track, say Deeter.
“With lending, it’s the opposite to self esteem issues. You will think you’re good but the bank will be critical of you.”
Honesty is not only the best policy when it comes to buying a house, it’s the cheapest too. Deeter recalls a client losing out on his deposit very far into his house buying process because of an incorrectly filled-out application form:
They said they were perfectly healthy when in fact they had a number of medical issues. In the end, they couldn’t get life insurance and the deposit was lost because of that – it cost them 10% of the house price that they will never get back.
And finally, Deeter’s most important piece of advice in relation to buying? Take the leap, because it’ll never be as scary as you think – and nothing is forever.
Although buying a house is a big deal, a lot of people don’t stay in the first home they bought for their entire life. Property should be a long-term choice but be aware that usually it’s not a life sentence.
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