Buying your first home can be daunting. You may have family and friends who can step you through the process. If not, where do you start?
The 10 basic steps to get you on the road to home ownership are:
1. Find out how much you can borrow. This will determine how much home you can buy. It's based on a number of factors, including your salary. All of the major banks have calculators on their websites that can give you a starting point, but beware that they're a guide only. The next step is to get what's called "pre-approval" for your loan before you sign on the dotted line of a sale-and-purchase agreement. Make sure you keep money aside for moving and set-up costs.
2. Use a mortgage broker. Most first-time buyers go straight to their bank for a loan. A mortgage broker can shop around and get a better deal. It's free to use a broker because the lender you choose pays the broker a commission. What's more, if you're buying with KiwiSaver, a mortgage broker will help guide you through the process. Otherwise it's easy to make a beginner's error with KiwiSaver and miss out on the HomeStart grant and/or first-home withdrawal.
3. Get a lawyer. You need a lawyer to do the conveyancing. But it is really sensible to get lawyers involved earlier. They can help save your bacon by identifying problems with the property and the sale and purchase or non-standard clauses in the documentation that you may not be aware of. It can be expensive to keep consulting your lawyer every time you bid on a property. On the other hand, they can save you from buying a lemon.
4. Make friends with real estate agents. Agents aren't buyer's friends, because they act on behalf of the sellers. Nonetheless, make yourself known to at least one agent at each agency in your chosen area. If you're serious about buying they will keep you informed as suitable properties come onto the market.
5. Don comfy shoes. Typically in New Zealand the way to view potential properties is to visit open homes on the weekend. The more you can view, the better for educating yourself about the market.
6. Find the right property. If you're a newbie, the chances are you won't know a good buy from a not-so-good buy. The more legwork you do the better. There's a saying that the worst house in a good street is the best buy.
7. Do you want a do-up? Many first-time buyers look for do-ups in the hope of making money from them. Not everyone is cut out to do DIY, despite what you see on TV. Every pot of paint or new shower door is going to cost money and sometimes it makes economic sense to buy a property that doesn't need work.
8. Get the property inspected. Real estate agents are required by law to divulge any defects they're aware of. Even so, it's a huge risk to spend hundreds of thousands of dollars on a home without having a qualified inspector check it out. Hidden structural problems can be extremely costly to rectify and $1000 or so spent on a report will often pay for itself. Make sure that your inspector is qualified, because some reports are not worth the paper they're written on.
9. Make an offer. Eventually you'll find the right home that you want to buy. If you're lucky it will involve a negotiation with the vendor directly through the real estate agent. In a hot market, however, sellers tend to prefer to pit buyers against each other at auction. This means you're competing with other potential buyers on the day and you may not succeed.
Read up about auctions and take someone with you to keep you grounded. It's really important not to bid higher than you can afford, no matter what.
10. Avoid problems. There are all sorts of potential problems with New Zealand houses that you need to beware of. Take the time to search nzherald.co.nz and clue-up on issues such as leaky homes, cross-leases, titles, LIMs, body corporates and other fish-hooks. This is especially the case if you're buying an apartment or any property that was constructed or had rooms/extensions added between 1994 to 2004. In the case of an apartment, read all the body corporate minutes going back as many years as you can looking for issues such as shoddy construction or a shortfall in maintenance budgets.
Congratulations. If you've navigated the pitfalls and bought your first home, it's time to enjoy it. First homes aren't meant to be perfect, but they're a great stepping stone to financial wellbeing.