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Top 5 tips for buying your first home (Part 2)

Marty McDonald - Tuesday, March 22, 2011

Here is Part 2 of my top five tips for buying your first home. Don't over borrow, know the market and have fun with it!

3. Don't over borrow.

Easily said but sometimes hard to act on. Make sure you are realistic on what you can afford in repayments and don't just take what a lender says as gospel. Sometimes what they will lend in a given scenario is way over generous and sometimes its the opposite. Know what you can afford. For example if you earn a good salary but live at home, pay no rent or board but you can't save any money don't expect to able to manage a $500,000 mortgage without it seriously affecting your current lifestyle. Likewise if you rent and can still afford to save a decent amount each pay check don't be scarred of borrowing (within reason).

4. Know your market; don't let real estate agents push you into paying more than you should!

It is standard practice for agents to say there is another higher offer or that there are other interested parties. Many first home buyers (all buyers really) often end up bidding against themselves and pay more for their property than they had to. Its never possible to be sure if there are other buyers and other offers on the table, even at auction there can be friends of the vendor dummy bidding to push up the price. The only way to avoid paying over the odds is to know what properties in your chosen area are worth and to then create your own ceiling price for a particular property that you won't go over. You need to do your research on recent sales (not advertised prices) and attend lots of open houses and auctions to get a gauge on the market values in an area. Be careful to not compare apples and oranges. A new 3 bedroom project style house is not comparable to a "period style" 3 bedroom house even if they are in the same suburb and have similar block sizes.

When you start negotiation on a property make sure you start below your ceiling by at least 10% or more depending on market conditions. Knowing what the local market conditions are is also vital. In markets that are hot sometimes you have to be aggressive with your offers or you can end up missing out repeatedly which leads to you chasing the market up. In slow markets you have to stick to your guns and be willing to walk away from negotiations. Always keep an eye out for properties that have been on the market a long time and which may have failed to sell at auction. Don't dismiss them as they may have desperate sellers willing to negotiate a lot on price.

5. Don't forget to have fun with it!

Although buying your first home can be a stressful process (especially if you don't chose the right people to help you) it can also be one of the most rewarding experiences you will ever have. Getting the keys and moving in to your first home is a feeling most people remember their wholes lives. It's a right of passage into the adult world. So don't forget to enjoy the journey!

Other Mortgage Experts web pages you may find useful:

95% home loans
Buying your first home
Genuine savings and non genuine savings
Lenders mortgage insurance 
Loan and stamp duty calculators


Marty McDonald

About the Author: Marty McDonald is principal of mortgage broker “Mortgage Experts”. Marty specialises in assisting active property investors with loan structuring advice and implementation as well as helping credit worthy borrowers with slightly outside the box income and employment situations. Find Marty on  and LinkedIn.

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