Part 1 | Tips 1 to 4
Thinking of buying a home? We have prepared a “8 Steps” guide to walk the journey with you and, to do so, we have asked our Propenomist to pen-down a simple, clear and comprehensive list of tips for first time home buyers.
Our last blog was about the pros and cons of buying or renting a home and we really hope you have been finding some interesting tips there. Now, we imagine you’ve made your decision and are now ready to kick off the home buying journey.
Let’s see together which are the steps to be followed to avoid surprises and to make sure the journey it is going to be a pleasant one!
Tip 1: What budget am I fit for?
This is for all property buyers a first compulsory step. It does not make much sense looking around for beautiful homes just find out the value is out of our reach, isn’t it?
Let’s use a simple rule of thumbs which states that out of the net household income a maximum of 35% can be allocated for the purchase of a home.
I always recommend to calculate only the net income leaving out bonuses and extras or, if you have a second or maybe a third source of income, just use the main one as this will offer you a financial parachute in case of any emergency. I.e. the household has a net income of RM8,500 per month the maximum monthly loan repayment shouldn’t exceed RM2,975.
A last tip on the “sizing of your budget” is, when you start making up your mind about buying your dream-home and while doing all the researches and the visits to sales galleries of developers, do a couple months’ testing before moving the buying step and make sure you are really comfortable with the designated amount! By the way, this exercise, besides confirming your financial fitness, will also allow you to save the extra cash that you may need to proceed smoothly with your dream home purchase, keep reading.
Talking of budget, of course, we also need to keep in mind the outgoing flow of cash that purchasing a home generates, besides the loan recurrent instalment. What are we talking about here is the deposit, the legal fees for Sale and Purchase Agreement, the legal fees plus stamp duty for the Loan Agreement.
A first time home buyer has two possible alternative routes for the dream home buying journey: the first is buying the dreamed of dwelling from the secondary market while the second one relates to the primary market with plenty of interesting and attractive offers from the related developers.
To make the difference clearer, I’ve prepared a comparison table which should be inclusive of all the possible extra costs, or cash out, related to purchase, see it below.
Last but not least point of this first step is, know what the market is offering and what are the values of properties in different locations. Check out the various property online portals and double confirm values and information on the area, project and market values, then apply the old but always right property quote saying:
Tip 2: Finding Your Dream Home
Nowadays, a home buyer can easily sit back, relax and browse the internet first to search, compare and evaluate all possible offerings available in the market using one or more of the online property portals.
The following are few golden tips that will help making the right choice when the “buying moment” comes and, do not forget to check this blog too, very educative and unbiased.
- Location, location and again location. This old investors’ rule has a very wide meaning as it includes the potential of an area for future growth, accessibility of the property, public transportation, amenities and much more. Buyers for own staying shall check proximity of schools for the kids and workplaces for the parents, maturity of the area.
- When buying from developer the purchaser should check that the project has all the needed permit from the government. In Malaysia, all residential projects, including most of the “residential on commercial title”, must carry an “Advertising Permit & Developer’s Licence” (APDL) released by the Ministry of Housing (KPKT). By law developers need to have these information printed within their brochure, check the bottom part of the last page and … here you go.
- Buying a home from a property developer gives plenty of advantages but, the purchaser needs to do some checking on the track of record or past completed project. Website, property forum and social media are definitely recommended places where to go and collect information besides a compulsory stop at the KPKT (Housing Ministry) website.
Tip 3: The Compare/Contrast Step – Know What You Buy
Once the right property has been selected, our home buyer should do a good compare and contrast analysis with nearby projects and properties. In few words list down all the similarities between projects and then repeat the listing down but this this time highlight all the “unique” aspects of each project.
The table below is a useful tool that has helped me and several more investors and property buyers in making the right decision. You can request it from the SCP Group sales team here, if interested, it comes with comprehensive filling instruction.
Tip 4: Get The Loan Eligibility Right
Too often I’ve seen beautiful dreams, owning a place that can be called home, being broken by loan rejection! A smart thing to do, on the way to buy a home, is definitely to get our loan eligibility pre-checked to avoid disappointing surprises once applying for a housing loan.
There are various ways to achieve this: one is a D.I.Y. analysis, the second rely on a direct bank approach while the last utilises the services of a mortgage broker.
- D.I.Y.: even with limited knowledge in terms of mortgage and money, going through a self-check-up of our loan eligibility is not too complicated. It all starts with downloading our personal “debt & payment record file” from Bank Negara, it is commonly known as CCRIS. This report is what banks are normally looking at when rating our loan eligibility, it contains all our debts records and our payment history. The debt records allow us to understand where our Debt Service Ratio (DSR) stands. A healthy range of 30% to 40% will allow our loan application to go through the approval process very smoothly. The calculation of DSR is quite simple and can be easily done using this formula.
- For the second and the third option, using the services of a bank or a mortgage broker, the procedure is quite similar. Most banks are supporting their clients with loan pre-screening option. It’s enough to reach out to your banker and ask what is your “loan eligibility” to purchase a home. The reply will come fast and complete. With a mortgage broker there might be some minor costs involved, I prefer to leave this option up to personal choice.
There are plenty of additional tips and suggestions ready for home buyers but all at once might be causing a “too full” reaction by our brain. It would be good for all reader to get all the points above understood before moving forward to more information. To help on this, we have decided to break this list of useful 101 tips & suggestions article in two parts.
Stay tuned and follow us to make sure you will not miss part 2.