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Your First Home – A Guide for First Time Buyers

Ah, the first home.

It’s every young, wide-eyed young man and woman’s dream. The tingling of the keys in their hands, and the excitement of turning the lock to the door of their first pride and joy in the milestone of their adult life and career.

Buying a home is a pretty big deal. But with so many options out there, the whole process can get a little bit intimidating.

But fear not. Buying a house need not be as complicated as it sounds. Here’s a guide to help you figure it out:

Step 1: Determine the reason for your purchase

Most people would consider the budget first and wonder if they can afford the down payment, subsequent loan repayments and other miscellaneous fees involved. However, before we start punching in the numbers on the calculator, there are a few important questions we need to answer.

Consider the size, location, accessibility and purpose of the property – whether it’s plainly for investment, your own stay or is it for a small office home office (SOHO). Evaluate – why and how did you arrive at this purchasing decision.

If you’re looking to bring up a young family in the suburbs, then proximity to schools and safety of the neighbourhood is of paramount importance. On the other hand, if you’re buying to invest – i.e rent out to students, working professionals, expats or as an AirBnB, then you’d need to consider each factor differently in relative to their purpose.

And last but not least, let’s not forget that there are 3 types of land titles in Malaysia – freehold, leasehold and Bumiputera Reserve. Properties under different land titles yield different prices and resell value. If your intention is to invest, this is an important aspect to consider as well.

Step 2: Decide how much you can afford

There’s quite a few costs you’ll need to consider when purchasing your first home. Typically, most experts will suggest that your monthly loan installments should not be more than one-third of your income. So if you’re earning RM 6000, your monthly repayments should be no more than RM 2000.

Let’s not forget, there’s also down payments you’ll have to factor into your budget. In most cases, you’ll need to provide 10% of a property’s price to lock in your first home. So if your dream home costs you RM 500,000, you’ll have to fork out at least RM 50,000 excluding additional fees and charges, depending if you’re buying first hand or a sub sale unit.

Usually new properties require less down payment as the developer may offer special discounts and promotions to attract new buyers. On the other hand, sub sale units require potential buyers to have a certain minimum amount of capital on hand as down payment without the benefits of subsidies and discounts.

Step 3: Research. Let’s repeat that, Research!

Once you’ve decided how much you can afford, here’s the most crucial part of your entire purchasing journey. It’s time to do your research! Buying a property is a long term commitment, and it lacks the liquidity other investments have. Therefore, it is vital that you find out as much as you can on your intended purchase to avoid disappointments down the road.

To start, you’ll need to spend some time browsing to get a rough idea of house prices in various locations. You can do this through a website like this. It will be vital to do so to gain a general sense of what falls within your budget. Of course, with more popular areas that are in higher demand will yield higher prices.

Also, for new developments, find out more about the developer and check their background for completion history and quality especially if they are less well-known in the industry. The last thing you’d want to happen is to buy a half abandoned project due to cash flow issues or putting your money in a low quality or poorly maintained building.

For those who are looking to buy sub sale properties, remember to check for defects and the history of the house. Second hand homes that are unusually cheap or under-priced in a prime location outside the auction market definitely warrants a more thorough background check…if you get what we mean. Trust your guts, if the deal is too good to be true, you should be concerned.

Step 4: Start looking for your property

And here’s the moment you’ve been waiting for. After all the groundwork, it’s finally time to embark on the search for your first home.

With the help of the internet, it’s easy to gain access to all the information you need to find your first property. You can start looking directly on the developer’s website if you already have a fixed property in mind, or if you’re still browsing around, sites like iProperty and Propertyguru offer listings that are filtered to your desired price, location and type of property.

Step 5: Securing the deal

Hang in there, you’re nearly at the finish line. Once you’ve found your dream home, it’s time to secure the deal. You’ll likely be asked to pay a 2-3% booking fee to the property developer or agent and will be given a booking receipt. Then in 2 weeks, you’ll be required to sign the Sales and Purchases (S&P) Agreement and pay the 7-8% of the deposit.

Step 6: Start looking for a home loan

Once you’ve paid your deposit, it’s time to begin searching for a home loan. This is going to be a lot like Step 3 of this process since you’ll need to do a bit of research. When you research for a home loan, look out for banks that charge the lowest interest rates.

After you’ve decided on one, you’ll have to prepare your application form and submit all the important documents such as your pay slips, EPF statements and booking receipts. The bank will then assess your application to decide if they will approve or reject the application. If you get approved, you will be issued an Offer Letter from the bank which you have to sign.

When the process is complete, the bank will provide the property seller with the loan amount and the keys will be given to you. It’s now time to celebrate. You’ve bought your very first home!

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