Buying your first home can be a pretty daunting process, especially when you’re just starting out. So, we’ve put together some top tips to keep you on the right track and help you achieve your home buying goals.
1 – Set a goal and plan
Your first step is to get a good plan sorted out. It’s common for people to aspire to buy a home but then fail to plan for it accordingly. Your planning should involve when, where and why you want to buy a house. Once you work out your driving factors and turn it into a goal you can work towards, it’ll be easier for the next step.
2 – Get saving
Saving doesn’t have to mean all doom and gloom! In order to show your future bank or lender you are sensible with your money you should have a budget, save a set amount each pay and not dip into these savings. This doesn’t mean no holidays, dining out, or fun purchases, it means being cautious of your spending and making smart money decisions. What is more important? A new car or being $10k closer to buying a house?
Banks have a handy online repayments calculator to see how much repayments will be on the loan amount you need. Use this as a savings goal so you can show the bank or broker that you can afford the repayments when you apply for a pre-approval.
If you’ve got any debts, it’s best to pay off the highest interest debt first, or consolidate the debt at a cheaper interest rate. When you go to the bank for a mortgage, they’ll be looking for a good credit rating and good savings habits.
3 – Research funding options
For a new build, first-home buyers can usually have a deposit of 10 per cent while property investors are currently required to have a deposit of 20 per cent. SM Property specialises in new build properties so only require 10% deposit.
It helps if you have been in KiwiSaver for more than 3 years and can access government grants such as a KiwiSaver HomeStart grant which can be added to any savings in KiwiSaver. Grants of up to $5000 per person to purchase an existing home, or up to $10,000 per person when buying a new-build are also available. More information can be found at https://kaingaora.govt.nz/
If you need more help, there are options where parents, family or friends can loan money, guarantor or be a joint borrower to get you over the line, however legal and financial advice should be sought after. A good broker and solicitor here is quite important. Feel free to contact me for recommendations.
4 – Get a mortgage pre-approval
Your bank, or even better a good broker, can walk you through the process of getting mortgage pre-approval. Providing you meet the criteria, a pre-approval can be given for a set amount of lending. This is crucial so that you know what your budget is and can act quickly if you find a property you love.
When it comes to using your current bank, consider using a mortgage broker – they are paid by the bank that secures your lending, they know what rates are competitive and what banks are allowing lower deposit lending.
5 – Wants vs needs
We all know that often our wants are very different to our needs. Prioritise what you NEED in a house from what you would WANT to have.
Start by making a list of ‘wants’ and ‘needs’, prioritise these from most important to least important. These can be anything from price, location, number of bedrooms, to the look and feel of the property. If there’s something you’re not too keen on, just remember that cosmetics can be changed. Focus on if the location and price is right and work renovations into your budget.
6 – Stepping Stones
It’s important to remember that your first home may not be your dream home. Buying your first home should be like buying an investment. You want to buy something that you can use to help you get to your dream home. This might be buying a less desirable house to renovate, or an ideal property for renting out rooms to help pay the mortgage. It’s time to think outside the box! Visualising potential will help you beat the competition of other home buyers who are chasing “ideal” properties.
7 – Find a good agent
The relationship you make with a Real Estate Agent can mean the difference between finding your first home easily, or battling the crowds at open homes and auctions. Once you’re specific about your criteria, a good agent can let you know about properties before they hit the market allowing you to view the property first and place an offer. This could mean the difference between an easy buy or 6 months of searching. They know the good streets, recent sales and market conditions which can save you from overpaying for a property.
8 – Assemble the team
Your team will consist of a mortgage broker and solicitor at minimum. If you are looking at an existing home you will also need a building inspector. You may require a registered valuer and possibly a builder to quote repairs or renovations. A good team of professionals will ensure everything runs smoothly, and a good agent they will happily work with your team.
9 – Do your due diligence
Use your team to help with due diligence, before or after placing a conditional offer. Your due diligence will be different if you are looking at an existing home or a new build. Check out our due diligence guide here.
It’s essential to have your solicitor review the Certificate of Title and the Land Information Memorandum (LIM), to highlight any concerns with the land or buildings.
A building inspection is another necessity if you’re buying an existing home. A building report will highlight any concerns with regards to maintenance or lack thereof. It will also highlight if the property is structurally sound or any expensive maintenance is needed. A renovated property might look like it doesn’t need an inspection, but always be cautious as to why the renovations took place.
10 – Stay Positive
Often, the first house people find is not the one they secure and buy. Unless you have an “unconditional” agreement on the property and the keys are in your hands then it’s not yours just yet!
Keep your wants, needs and your budget on your mind, especially when negotiating the price. Over paying for your dream home can quickly cause it to become your nightmare if you can’t afford to keep paying your mortgage.
It may seem daunting and stressful but it’s worth it in the end. The champagne is calling, so get saving, planning and searching. You’ll get there with the right attitude and preparation.
