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Top 10 mistakes to avoid when buying your first home

The process of buying a first home can be an exciting experience for many, but that joy can quickly turn to confusion and frustration, especially if you don’t know what to do or expect.

Experienced homeowners and real estate agents alike know that first-time homebuyers make some of the costliest mistakes that can haunt them for years. The best way to avoid any potential heartache is to know what they are in advance. Here, we’ll look at some common mistakes so you can be more prepared!

1. Did not obtain a loan pre-approval

Before you start looking for a property, it’s important to figure out the amount of home loan you can roughly afford. After all, if your monthly installments are way too high, you might find yourself in a money crunch by the time the interest kicks in. With a pre-approval estimate, however, you’ll know the amount of home loan you can get from the bank — which will give you a fair idea of whether the property fits into your budget, and not the other way around!

2. Not reviewing your credit report first

Getting a home loan gets trickier if there are issues with your credit report. Therefore, you should make sure that you deal with this as soon as possible to avoid any additional stress. Credit reports are important because they give you an insight into your money matters such as outstanding debts (if any), so you should always understand what they really mean and what it is that you can do to keep your score healthy.

Lenders will be able to make a sound decision when they take a look at your CCRIS report, which is a comprehensive evaluation of an applicant’s financial health. The CTOS score, on the other hand, is a numerical representation of an individual’s creditworthiness — the higher the score, the better it is for the applicant’s chances of having his/her home loan approved.

3. Visiting houses that are well out of your price range

If you know exactly how much you can afford and a loan pre-approval is already underway, the last thing you’d want to do is go window shopping for a house that costs more than what you can afford. Always make sure that you spend within your means, and remember that the general rule of thumb is to not spend more than 1/3 of your monthly salary on your monthly repayments!

In any negotiation, it’s crucial to have room in your offer to allow for negotiations. In other words, you don’t want to give the seller a price that’s non-negotiable. You’ll want to state a number that reflects the price you know you can pay, but that also leaves room for you and the seller to negotiate.

4. Attracted with the first home

When you first start house hunting, you’ll feel a rush of emotions that makes it hard to compare different properties. Some agents will tell you that the first one you see is the best, but that couldn’t be further from the truth. When you visit a dozen or more houses during the buying process, each one will present its own unique pros and cons, and it’s up to you to figure out which ones are deal-breakers or not.

It’s always better to do plenty of research before embarking on a big decision. That’s because proper knowledge of the options you’re considering can help you avoid making uninformed decisions. In other words, you’ll be less likely to jump on the first product that gives you a warm fuzzy feeling in your gut.

5. Omitting to look for significant faults

First-time homebuyers often overlook the importance of checking every nook and cranny of a house, and as a result, are faced with a lot of costly repairs that they had not anticipated. When moving into a new house, it’s important to be fully aware of the condition of your home.

You don’t want to be paying for expensive replacements or forking out vital items that need to be fixed. If you’re purchasing a subscale property, make sure you are aware of any repairs that are needed and try to negotiate with the seller for the fixes. Otherwise, these can sometimes run into the thousands, and they can really hurt your pocket.

6. Ignoring the neighbors and the surrounding area

Once you are ready to purchase a home, it’s vital to make sure that you ask the right questions. It’s not just about the value of the home, but also what the neighborhood is like; how far the location is from certain key locations, such as schools or retail stores; and if there are any issues with neighborhood crime or other problems.

7. Not using a real estate agent

Qualified and experienced real estate agents are not a luxury—they’re an absolute necessity in the home purchasing process. A good negotiator with plenty of experience is like a one-stop solution, helping you find and buy the house of your dreams for the best possible price. A professional can also negotiate for any necessary repairs and upgrades with a seller’s agent, to ensure that everything goes smoothly during the transaction.

Real estate agents have extensive experience and sources that can help you narrow down your list of properties to something that fits in your price range. Along with their database of contacts, skilled real estate agents can guide you through the entire process of buying a home. And they’ll do it efficiently and effectively on your behalf.

8. Avoiding lender comparisons and rate shopping

When choosing a bank, always check and compare all the interest rates from a variety of banks and find out which one gives you the best deal. If you ignore this step, you might end up with an unfavorable deal that could cost you thousands of Ringgit over time. Make sure that you consider all the available options — don’t just focus on the rates, as there are other variables to be aware of such as repayment terms, customer service, and how long it takes to get approval.

9. Not being (really) financially prepared

Owning a home costs more than just your monthly installments. There are other ‘hidden costs’ to consider, such as the stamp duty and legal fees. You’ll have to cover maintenance and repair costs, as well as utilities and other fees too. Many people who buy their first homes underestimate how much they’ll need to budget for all these expenses, leading them to run into financial trouble later on.

10. Having a significant amount of debt

While an outstanding credit history may be the first thing a bank considers when determining credit acceptance, it’s never good to have too much of it. So, another crucial step is to check your Debt Service Ratio (DSR), which basically calculates whether you are able to pay off any debts and afford the home loan you’re applying for. Those who have a large amount of debt may be viewed as high-risk; even though they could actually pay back their loans, the financial institution may not be willing to take the risk.

Buying your first home is a big step, but it doesn’t have to be difficult. By avoiding these common mistakes, you can make sure your first home-buying experience goes smoothly and ends with a new place to call home!  Looking to find your dream home? Check out PropertyGuru for home searches in Malaysia. They provide comprehensive property guides with detailed descriptions, floor plans, and photos for new home listings.

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