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    Turn on the news, flick on the radio, do a quick Google search on first home buyers and you’re bound to come across the term FOMO or the “fear of missing out”. This fear of not finding a home to buy is leading to some people to rush into mortgages they often can’t manage or don’t think about how to manage when interest rates will go up in future. Much the same as can happen with a ‘buy now pay later scheme’, some borrowers are getting over their heads.

    But I’m going to miss out

    This FOMO mentality can lead homebuyers, and particularly first home buyers, to not think straight when making home buying decisions.

    If you listen to some to media reports, you could be forgiven for thinking that all house prices are going up at crazy rates and will do so forever. Because the media tends to highlight the extremes of the market, we tend to sometimes forget these crazy price sales are not in fact the average. However, these reports have led to bidding on properties that homebuyers would normally walk away from simply because they are scared they otherwise wouldn’t be able to get on that property ladder.

    Ignoring all of their ‘must haves’ and their pre-agreed budgets and buying homes outside the financial capabilities, folk are ending up buying a home at a price they can’t afford. Why? Because they’re focusing on the home’s sale price rather than the monthly payments it will carry, for decades! They end up being ‘house poor’. And being house poor is just being poor.

    FOMO is leading to owners buying houses they can’t actually ‘live’ in; they merely exist with a huge debt-to-income ratio while feeling very financially stressed.

    The answer? Don’t freak out and don’t get caught in the FOMO trap.

    That might sound easy in theory, I know, but homebuyers need to stick to a purchase price they’re financially comfortable living with.

    “How do you do that in a hot property market?”, I hear you ask.

    Well, first you have to have faith that the market won’t always keep going up a such a crazy rate. I know these constant reports in the media about rising house prices are feeding the FOMO frenzy and are not at all helpful, but you need to have faith that you’ll always be better off having waited than having over-committed.

    Taking a longer-term view

    History has shown us that when property markets are hot, property owners – both homeowners and property investors – put places on the market in the hope of making bags of money. This leads to more stock being available which in turn leads to less reason to buy inappropriate homes thanks to a fear of missing out.

    According to REINZ in October 2021, real estate agents nationwide had reported seeing fewer investors looking to make a purchase. They had also reported a lift in appraisal requests, and some had reported investors bringing more properties forward to sell. Why? Well possibly because interest rates are rising and tax breaks for property investors have been removed.

    Don’t let FOMO make you lose sight of what is important

    More properties within your price range are likely to come onto the market, so don’t lose sight of what matters to you in a home, and in your lifestyle. You will have choice, and you will have less reason to panic buy.

    Regardless of whether the property market is hot, warm or cool, you need to always approach it in exactly the same way: only buy a home that ticks your boxes and is at a price you can afford. Otherwise, you won’t be able to afford to actually ‘live’ in it.

    This approach of buying within your means is being reinforced by banks now more than ever.

    Banks have an obligation to lend appropriately

    To be able to buy a home today, you need to convince a bank you can afford to do so. Banks have an obligation, by law, to lend appropriately and even though banks’ lending criteria has remained the same, mortgage approvals need a new level of disclosure.

    Banks require loads of paperwork that demonstrates your ability to repay a loan and they want proof of your spending habits and any and all debts you may already have, such as student loans, car loans and credit card debt. They’ll want to take your entire financial situation into account when considering how much house you can afford and that will also mean taking into account the cost of insurances and rates once you’ve bought the property.

    How can our mortgage brokers help?

    It’s so very important that you get your finances sorted out and due diligence ticked off before committing to the dotted line on a new home.

    We can help make sure you’re not turned down for a mortgage because your paperwork is not in place, or waste precious time applying for loans from banks whose criteria you don’t meet. We can give you impartial advice on which banks will lend on different property types, and help you figure out what you can and can’t do.

    Get ahead of the game

    Our mortgage brokers can advise you on everything you need to know about taking out a mortgage and the house-buying process. They can help you get fully organised and armed with the right kind of financial information so banks will know you are buying within your means. Our brokers can then present and argue your case to the right lenders for you and we can talk you through making an offer and advise on an auction strategy.

    Locking in the best interest rates

    Another way to make buying a home more affordable is to lock in the mortgage rate and get the right loan structure at the terms that best suit your lifestyle now and into the future. This is something the mortgage brokers at Global Finance are expert at. All you need to do is get in touch.

    **These are general guidelines and are by no means a reflection of bank or lending policies