Mistakes to avoid in a competitive housing market

1) Not running a credit report check

Ensuring you have a good credit score is vital, even before you consider viewing properties. Mortgage lenders will investigate fine details of your credit reports when determining your ability to pay back a loan, and the interest rate they may offer.

If your reports unveils outstanding loans, or even just small amounts of credit that you have not previously accounted for when applying for a mortgage, it could impact lenders’ decisions massively. Therefore, it is a process that you cannot afford to rush

To prevent this, you can request a free credit report each year. Before applying for your mortgage, dispute any errors you may come across, and ensure you claim everything when applying. This includes anything from credit card debt, right down to interest-free payments on luxuries such as furniture, cars or holidays.

2) Putting an offer on a property without knowing how much you can borrow

Before you start viewing properties, it is important to check how much money lenders could offer you to borrow. Prior to making offers on a property, it is often worth speaking with a mortgage broker, who will be able to give you expert advice. You can visit website of a mortgage broker service or speak to ones in your local area, so you can get advice catered to your situation and needs. Alternatively, you can look at mortgage calculators, to help give you an idea of what you can afford.

If you put an offer on a property and already have a mortgage in principle, it should help speed the process along. Therefore, it is likely to make you a more attractive buyer and will help you to stand out against the competition.

3) Focusing too much on the aesthetics of a house

When viewing a home, it is often the aesthetics that attract prospective buyers immediately. The idea of moving into a beautifully furnished house could seem a dream – you do not need to spend a fortune doing it up, and it is immediately an impressive investment.

However, you need to ensure the structural elements of the house are well maintained too. It is important to ask questions on fundamental elements that may cost you a lot of money once you move in. If there has been a recent extension, be sure to check why, as it may have been built to cover a problem that has not been properly fixed.

You should also ask about utilities such as how old the boiler is, or what the water pressure is like. If there are problems with such, it could cost you thousands down the road.

4) Underestimating how much a “fixer upper” will cost to be liveable

Often fixer upper homes make for better investments. By doing the house up over time, you can add great value onto the property. It is important to focus on the potential of the home, such as space and storage, over the colour of the walls or new kitchen tiles. However, you should ensure you have enough money to make it liveable.

Although you can never be sure how much money work to a house will cost you, it is important to do as much research beforehand. Before putting in an offer, it is wise to do some online research, or get a professional Property Valuation. After that, builders, plumbers or electricians will be happy to help with a quote. If there is a lot of work, it may be worth bringing them along to a second viewing.

Just ensure you make the vendor or estate agent aware of this before bringing a tradesperson along. Alternatively, having a conversation with an expert, and showing them photos and floorpans may give you a good idea of how much money you may need to spend.

5) Putting an offer on a property which is too low or high

Negotiating an offer on a property is completely valid, and can be key to securing one worth the investment. However, if you make unrealistic offers, it may not work in your favour in the long run.

It is wise to put an offer below what you are willing to pay by a fair amount. Be sure to explain your offer, through stating exactly what work the house needs and how much it would cost. This will then allow you to up your offer at a later date, which will seem more attractive to the seller.

It is also a good idea to research other homes in the area. If you can argue that the asking price is above what similar properties sold for nearby, you will have a strong case negotiating house price reductions.

If you make an offer on a property that is too low, it could make an estate agent question whether you are ready to buy, or are serious enough. This could put you at a disadvantage if a house is in high demand. Estate agents may not have you down as their first call, if they know they could shift the property quickly.

Alternatively, with the housing market being so volatile, you should be wary of getting caught up in a bidding war. If the only way to secure a property is paying over the asking price, due to such competition, you could risk losing money on the property in the long run

6) Not taking into account the additional costs when buying a property

Outside of the deposit, there are many other elements you need to consider when buying a house. It is easy to miscount how much you need to save when purchasing a property, as there are costs that could be easily missed. The most expensive fee alone is usually the legal fee, which could set you back up to 2,000, alongside searches.

Additionally, elements such as a valuation can cost up to 1,500 depending on the initial value of the property, and a surveyors fee could set you back at least 600.

Outside of this, you have smaller fees, such as electronic transfer fees that have to be paid to solicitors, and lenders often charge an arrangement fee and mortgage valuation fee.

Aside from these additional costs, you may also have to bear the expenses of any damage that the home inspectors may have overlooked. Roof damage, for example, would most likely be visible only during the rainy season or if there was a leak. As a result, you may need to look for a professional company that can do roof replacement Brisbane or elsewhere at that time. And scenarios like this are unavoidable. You probably would have no choice but to spend money to repair these damages. Hence, you always need to have a buffer amount to get through these inescapable situations in addition to all the extra costings as mentioned before.

7) Not comparing mortgage deals

It is important that you shop around for your mortgage – don’t just take one out with your existing bank, because you might not get the best deal.

Before accepting a mortgage offer, it is important to assess your monthly income and outgoings. Many people opt for a 25-year term mortgage, as it will help you pay off your mortgage as fast as possible. However, if you opt for a longer term mortgage, your monthly repayments will be lower.

Additionally, take a look at the interest rate on mortgages. Although it is great that there are affordable mortgage products on the market , it’s worth understanding that 95% LTV loans charge a higher interest rate than even a 90% LTV mortgage, as a lender considers you to be slightly more of a lending risk.

Generally speaking, 95% mortgages are typically between 0.5 – 1% more expensive than 90% deals, so you’re likely to face higher monthly repayments than you would if you bought with a higher initial deposit and a lower LTV mortgage.