First time buying a house and have no clue where to start?
Don’t understand what is the difference between Freehold or Leasehold or Service Apartment and Condominium?
Well, FEAR NOT!! We have put together a step-by-step guide to buying a house and hopefully there is a happy ending where you are a proud homeowner!! Check out our step-by-step guide below right here.
Step 1: How much can you pay monthly?
First, you need to have a budget set aside for monthly mortgages, on top of your other monthly commitments such as car loan, personal loan, insurance, etc. The total amount should not exceed 1/3 of your take home pay (minus income tax and EPF contribution) (30% of your pay goes to your daily expenses).
Salary: RM 4500/monthly
Take home pay: RM 3,931.90
Car Loan: RM 785.00 (Proton Ertiga 1.4 Exec, 3.15% interest rate, 7 years repayment period)
Personal Insurance: RM 150.00
Daily expenses (30%): RM 1,180.00
Balance left for housing repayment: RM 1,816.00
House Affordability Value: RM 425,000
Salary: RM 8,000/monthly
Take home pay: RM 6336.10
Car Loan: RM 1,073.00 (Honda City 1.5E, 3.15% interest rate, 7 years repayment period)
Personal Insurance: RM 150.00
Daily Expenses (30%): RM 1,900.00
Balance left for housing repayment: RM 3,213.00
House Affordability Value: RM 750,000
Second, do you have enough savings? Can you come up with 10% of the property value for down payment? In addition, there’s GST, SPA legal fee, stamp duty, etc. which comes up to approximately 14% for down payment.
To get the full picture, use our fee calculator.
Not enough savings? Check out these government schemes for an easier way to own your first home.
1. 5 Affordable Housing Schemes and How To Get One
2. 5 Ways to Get That $$$ for Your New Home
Step 2: Virtual House Hunting
It’s really convenient with the internet nowadays to find countless home options. First off, you can start with an area you want to live in. Use Propertypricetag.com, it’s like a search engine for properties over the internet for all available options. You can shortlist and weigh your options with just a few clicks. The website also offers home hunters an opportunity to view the properties in 360° virtually. Once you have shortlisted the properties, compare them and start making appointments to physically view the house with sellers or agents.
Here are some articles to read while you shortlist the properties:
1. Can You Afford to Stay Far Away?
2. 5 Reasons to Use VR Tour for Property Viewing
3. 5 Things You Must Check When Buying A Service Apartment
Step 3: It’s Getting Real!
Once you’re ready for the physical viewing, arrange to meet with the seller or agent. An ideal time to view a house would be on a clear sunny day, because then you’ll be able to tell whether the property gets natural light and where the direction of the sun, is the neighbourhood is quiet or lively during the day or even the businesses near the area. Ask questions!**
*Pro-Tip: Get someone you trust to go with you so you get an extra pair of eyes to help you observe and it’s advisable for safety reasons.
Download our FAQ
Step 4: Are you paying the right price?
Found the right house and you think it’s the right price? Check again. Check if you’re paying within the properties’ sold price range in the vicinity. You will be in a better position to negotiate with the seller when you know more about the price range of that area.
If it is a strata condo, request seller for the latest Joint Management Body (JMB) and Management Corporation (MC) accounts. Has there been any reports about the JMB going bankrupt or are having financial issues? An unhealthy JMB or MC account can mean poor building maintenance. (For more information about JMB or MC accounts, read Check #1 in our article “3 Must Checks Before Buying a Sub-Sale Condo.”)
Moreover, if it is a leasehold property, check how many years it has left. Also, check for other land encumbrances; land tax, quit rent, etc..
Read: 5 Property Taxes Every Property Owner Should Know
Step 5: Ready for the Price?
When everything is in order, and you are mentally prepared, then make your offer through the agent; alternatively, if it’s directly with the owner, then make it with a lawyer. Make sure you verify the agent’s Real Estate Negotiator (REN) number with the real estate agency or The Board of Valuers, Appraisers and Estate Agents Malaysia (BOVEA) to ensure their legibility. The lawyer or agent will then prepare a letter of offer. In the letter of offer, it will state that 2% of the offered price should be placed with the seller’s lawyer or real estate agency. We suggest the following condition precedent to secure your earnest deposit:
a. in case you don’t get a bank loan or
b. if the value of the property is X% significantly lower than offered price, you are able to get a refund of your 2% deposit.
Step 6: Apply for a Bank Loan
If the owner has accepted your offer, you may apply for a bank loan with the Letter of Offer. Here you will have to look into which bank is going to offer you the best loan deal for your monthly repayment.
Documents you will need to provide to the bank include but are not limited to:
1) Photocopy of your IC
2) Last 3 months’ salary slips
3) Last 2 years EA forms/EPF Statements
4) Letter of Offer/ Booking receipt from developer
During this time, the bank will ask you to appoint a valuer or the bank has a panel of valuers you can use. Make sure you set cash aside for valuation.
*Pro-Tip: Apply loans at a few banks (at least 3), to compare the interest rate as it differs with banks.
Step 7: Signing of SPA
After you have decided on your loan, get your lawyers to prepare the Sales and Purchase Agreement (SPA), make sure that all the terms and conditions you need are in there:
a. vacant possession, including or excluding tenancy,
b. make sure money from previous tenant’s deposit is transferred to you, etc.
If you need to visit the property again to reconfirm your decision, do so. There is no turning back once the deal is done!
Here you will have to pay the balance of the 10% down payment.
Note: Between 1st January 2017 to 31st December 2018, any SPA signed during this period by a first time home buyer, you’ll enjoy 100% exemption on stamp duty for property value up to RM 300,000.
Step 8: You’re almost there!
After clearance from the bank to release the 90% loan to the seller/developer, your lawyer will send you their bill and stamp duty fee (if applicable) and arrange for the keys handover.
When you receive the house keys, make sure you check and inspect the property thoroughly, and confirm that all the maintenance and utilities fees addressed to the previous owner are cleared.
Once you are satisfied with everything, go on and sign the final paperworks.
Step 9: Congratulations, you are now a homeowner
Start planning the renovations and happy decorating your brand new home.
P.S. Don’t miss out your upcoming monthly mortgage payments 😛