Purchasing your first home is one of the most challenging yet rewarding investments you can ever make. Coupled with the excitement of owning a high-value property is the overwhelming feeling of anxiety that can burden first-time homebuyers in New Zealand. Finding a good house for sale, processing the paperwork, and securing your first home loan in NZ, are just some of the many steps you should take on this journey.
This article will help you take that first step toward buying your home. Learn what to expect from the process and how to make educated decisions that will benefit you in the long run.
The 6-Step Guide to Purchasing Your First House
The sections below present a complete and practical guide to help you buy your first home.
1. Save up for a deposit.
The first step is the hardest. However, overcoming it can boost your chances of getting that dream house. Saving up for a deposit, for instance, is one of the biggest obstacles that many aspiring homeowners face.
In general, saving money for something big takes patience. It also takes trust that your efforts will all be worth it eventually.
How much should you save up for your home deposit?
Ideally, aim to save up at least 20 percent of the total home value. Based on 2022 data released by the Real Estate Institute of New Zealand, the median home cost is around NZ$600,000 to NZ$850,000, depending on the location. Naturally, homes in major city centres are more expensive than those outside metropolitan areas.
Given these numbers, you should set save up around NZ$120,000 to NZ$170,000 for your first home deposit.
Remember that the number of your deposit matters. For one, a bigger deposit means a more favourable interest rate. However, if these numbers are way over your budget, you can rely on lending firms and avail of financing options to help you cover your target amount.
Are there more convenient options for first home buyers?
If this is your first time purchasing a house, you can rely on financing options that are only available for first-time homebuyers. One way is to withdraw some of your KiwiSaver funds to complete your deposit. Banks and other home loan insurance companies also assist buyers through their First Home Loans options, which can reduce the home deposit to 5%.
These options can help you get onto the property ladder, but this is only the first half of the process. To establish a solid home financing plan, you must apply for a pre-approved loan.
2. Secure a home loan pre-approval.
Once your deposit is secured, make sure to apply for a home loan pre-approval. This process gauges your creditworthiness. A loan officer will assess your finances. These include your current income, assets, credit history, history of debts, and ultimately, your capability to pay for the loan.
The same step will give you a clear view of your financial capacity. The resulting assessment will determine how much money a lender will let you borrow. It will also give you an idea of the properties you can buy.
3. Hire a property purchase solicitor.
Although this step is optional, hiring a lawyer to help you in the buying process is beneficial. A property purchase solicitor can oversee the process, especially when ensuring that you get the best out of a deal.
Your property purchase solicitor will ensure that the seller does their end of the agreement. They will also go over property reports. They can also assist you in verifying the validity of the property titles, among others.
4. Search for your dream home.
After taking care of the financing side of the process and securing a pre-approved loan, you can now look for the property you want to buy. For this step, keep in mind to be realistic and stick to your budget.
Looking for properties is not a straightforward process. Before deciding, do your research first. You can start by looking at the Land Information Memorandum (LIM) Report. This report, issued by the local city council, contains all the historical and current information about the property. These include but are not limited to flooding history, potential erosion, slippage, or the possible presence of hazardous chemicals, to name a few.
Once you find your ideal property and location, you can consult your lender or loan adviser. They will then assess if your chosen home meets the financial conditions of your pre-approved mortgage. If you get a yes, you can now make the offer.
5. Put in an offer.
This step will depend on the method of sale set by the seller. For instance, some properties follow a multi-offer process in which more than one buyer makes an offer on the home. In such cases, the seller will have the final say on which offer to take.
If the seller accepts your offer, you will finally sign the Sale and Purchase agreement. If you hired a solicitor, you could have them read over the document to ensure that everything is according to your agreed terms. These include the purchase price and the amount of deposit, among others. All parties must sign the documents before they are considered valid.
Agreements with the seller can be conditional. Parties must meet several conditions before an agreed due date. Once these conditions are met, the agreement then becomes unconditional and fixed. Properties bought at an auction by default, fall under unconditional offers.
6. Get ready for settlement.
The settlement day is every first homeowner’s most awaited day. This can only happen once the buyer settles the balance. Additionally, your solicitor must process your papers for the Land Transfer Office to recognise the change of ownership.
Having done both, you finally become the official owner of your first home and get the keys to your newly purchased property. Congratulations!
Ready to purchase your new home?
Hopefully, this guide has given you an idea of the overwhelming yet rewarding process of buying your first ever dream home. From all the pieces of advice we’ve enumerated here, we hope that you can make informed decisions that can make this long journey worth the wait. Take that first step forward and start your journey to homeownership with confidence!
