A comprehensive guide for first-time home buyers
Embarking on the journey to buy your first home is both thrilling and daunting. I know, I’ve been there myself. I’ve also helped many first-home buyers navigate through what can be a confusing and time-consuming process the first time.
To help you buy your first home, I’ve come up with a detailed guide that breaks down each step.
1. Assess your borrowing capacity
The first step to buying a house is understanding how much you can borrow. This involves evaluating your income and expenses to determine your maximum borrowing capacity using bank calculators. These are available online, or you can reach out to a trusted mortgage adviser like me to help you run the numbers.
I can help you out here (and throughout the entire process). I’ll ask you to complete a fact-find form and upload supporting documents (payslips, bank statements, loan statements, proof of ID, KiwiSaver proof, etc.).
Keep in mind that banks typically test your repayment ability at around 7%, even if current interest rates are in the low 5% range.
2. Calculate your purchase price
The next step – add your available deposit to your borrowing capacity to get an estimated purchase price. This will give you a clear idea of the price range you should be looking at, which will help you narrow your search. It will save you a lot of time and potential disappointment down the road to know precisely how much you are able to spend before you begin your house hunt.
As your trusted mortgage broker, a key part of my job is helping you analyse your borrowing capacity and provide an estimate of your maximum borrowing and purchase price.
3. Explore low deposit options
If you have less than a 20% deposit, you might qualify for a Kāinga Ora first home loan, which is only available for first home buyers, provided you meet the eligibility criteria (joint income under $150k for the past 12 months and stable employment).
Several banks also offer this loan. Working together, we can seek pre-approval from one of these banks to ensure you have the financial backing necessary when it’s time to make an offer on your first home.
4. Understand Kāinga Ora’s First Home Loan requirements
The Kāinga Ora First Home Loan offers favourable rates to prospective first-home buyers who can afford to make regular repayments but are struggling to save enough for a deposit. If you meet the eligibility criteria, you may only need a 5% deposit, which makes it easier to secure your first home.
However, it comes with property requirements – including getting a registered valuation to confirm the market value of the property and ensuring any urgent maintenance costs within the next 12 months will be under $10k.
As a trusted mortgage adviser, I’ve helped multiple first-home buyers get on the property ladder quicker by securing one of these loans.
5. Prepare for purchase costs
Making sure you have enough money set aside for a deposit on a house is one thing. You’ll also need approximately $5k in cash for purchase-related costs – including legal fees, building reports, and valuation costs.
Starting a savings plan now can help you set aside enough money weekly, and will also demonstrate to banks that you have the ability to manage future mortgage repayments.
6. Obtain pre-approval
This is a big step in purchasing any property – whether you’re a first home buyer or a veteran investor. To get pre-approval, you will need to have all your financial information sorted, including proof of employment and deposit, etc.
Working together, we can target the best bank for your application and seek pre-approval together, which usually takes about 2 or 3 weeks.
Once approved, you’ll receive a letter to confirm pre-approval. Pre-approvals are typically valid for 2-3 months and can be extended for another 3 months if your situation remains unchanged. If you haven’t found a property within this period, you may need to reapply.
7. House hunting and purchase
Start looking for your dream home! 🙂
Once you’ve found it, I can guide you on making an offer. The agent will draft it up, and you will review it with your solicitor before signing. If accepted, you’ll have a property ‘under contract’ with certain conditions (e.g., subject to finance, building report, LIM).
Then we will work to get your finance fully approved. This usually takes around 2 weeks and may involve satisfying bank conditions, such as providing a valuation, sharing a building report, etc. Once approved, you can go ‘unconditional’.
Next we’ll discuss loan structure and interest rates. The bank will issue loan documents for signing, which usually occurs about 2 weeks before settlement. Then finally, on the settlement date, the bank transfers the money to your solicitor, and you receive the keys to your new home. Woohoo!
Buying your first home is a significant achievement. With careful planning and the right support, you can make this process smooth and successful. If you have any questions or need further assistance, feel free to reach out!
Good luck and happy house hunting from Nic’s Mortgage Magic 🏡
