First-time buyer? Here is your house buying 101 guide
Saturday, 25 November 2023
With so much chatter about property in the news, it’s easy to forget we're not born knowing how to buy a home.
While many of us will have parents who can guide us, they may be rusty on the process. And some of us have no-one to guide us at all. So, we’ve compiled this house buying 101 guide.
While we aim to be as up-to-the-minute as possible, the market is dynamic, and things can change quickly. As ever, do your own research and seek advice from professionals: a property lawyer, mortgage broker or licenced real estate agent.
So, I should start with property listings, right?
Only if you want your heart broken, mate. There’s lots of research to do before you start looking at houses!
Guides like the government’s Settled.co.nz, Kainga Ora’s home ownership guide and MoneyHub’s step-by-step guide can be helpful places to start. You might also join a first-time buyers group on Facebook to connect with people in the same boat as you. Check out The First Home Buyers Club and Stuff business editor Susan Edmunds’ book, From Renter To Owner, too.
Understand the types of ownership ‒ freehold, leasehold, crosslease and unit title – and the kinds of sales – auction, negotiation, and tender – in Aotearoa and what they might mean for you.
Sites like Homes.co.nz, QV.co.nz and Interest.co.nz, as well as Stuff Business and Homed can help you understand the market.
- Research your preferred areas – again, be realistic as some areas will simply be out of reach. Remember, you’re not looking for a specific house yet, just learning what the market is like in your chosen area.
What about money?
You need to get your finances in order to get pre-approval for a mortgage from a bank. Most banks require about a 20% deposit.
Online calculators can guide you on how much you can borrow. MoneyHub.co.nz has several, and most banks have calculators online too.
You can use savings, your Kiwisaver, any First Home grants or loans you are eligible for, and any gifts or assistance from family to build your deposit.
Most banks will want to see you have a good track record with savings, and can easily afford the repayments. They will also use a test rate, which checks how much you can afford if interest rates go up.
Most banks want to see three months of banking records, so spend some time scrubbing up before shopping for mortgage pre-approval.
Top Tip: Remember conveyancing and legal fees might cost you up to $4000, a valuation could cost $1000. And don’t forget to leave yourself enough to pay for the move.
Who can help me?
Consider getting a mortgage broker. They are employed by the banks – they may work for one, or several – so they usually will not cost you anything. They can help you put your best foot forward when it comes to getting pre-approved for a mortgage.
Try asking for recommendations from friends and family, and on Facebook house-buying groups.
Check if they have fees. Most will not charge you for the service, but they may want you to sign a contract with them that could include fees, and even fines, should you turn down deals they have found you.
What about legal stuff?
You definitely need a property lawyer.
They receive your Kiwisaver funds and your mortgage to pay the vendor.
They check the property title, and add your name to it when you buy.
They can also check covenants or restrictions on the property, so you know exactly what you’re buying.
They can go over your offer and suggest what conditions you need to add.
They may be the person you collect the keys from on settlement day.
Your broker might have a lawyer they recommend, but also ask your friends and family, and check out the NZ Law Society for more options.
I’ve got all that sorted, now I look at houses, right?
Yes!
Compile a list of your deal-breakers – but be realistic. Everyone wants a pool and a double garage, but few first timers can afford them. Keep in mind that slightly lowering your expectations might mean getting on the ladder sooner.
Limit your search to homes in your chosen area that are within your price range.
Attend open homes. You can talk to the agent about the property and see what the location is like in person.
If you like the house, arrange a private viewing. Take photos, ask to be shown the garage and any areas you didn’t get to see in the open home, such as the attic and under the house. Consider bringing a builder or handy person with you to give you advice.
I really like the property!
Yay! Let the agent know you’re keen. Now do your due diligence.
Get your lawyer to search the property title.
Request a LIM report, which will have detailed information about the property held by the council, order a valuation and get a builder’s or property inspection report. The vendor may have prepared these ahead of the sale, but your bank may prefer you to get your own.
I’m ready to make an offer.
It may be possible to put in a conditional offer, pending these checks. But bear in mind, the fewer conditions, the more likely your offer will be accepted.
If in doubt, have your lawyer check you have covered all your bases.
Make your offer via the estate agent. The agent will give you a copy of the Real Estate Authority’s sale and purchase agreement guide to go through. Read it.
My offer has been accepted!
Great news!
You will be required to sign a sale and purchase agreement, which is legally binding. Get your lawyer to talk you through this part. Once you sign, there’s usually no going back.
Your lawyer will draw down your Kiwisaver to pay your deposit.
You will agree on a settlement date, which is when the money will be paid to the vendor, via your lawyer, and you get your keys.
On settlement day you will pick up your keys from your lawyer at their office, or from the agent at the house. Congratulations! You’re a homeowner.