A Newbie’s Guide To Buying a Home: How to Determine If You Are Ready To Purchase A Home

Hong Kong - first time home buyer

Owning your own home is not only a decision that provides you with increase convenience, but it is a step towards attaining financial freedom. As much as you may find yourself obligated in making the repayments for the financing that you obtained to purchase the home, in the long-run you will marvel at your home ownership decision when you no longer have to repay the mortgages. Moreover, the equity of the home increases with time hence you will be glad when the value of the home will have appreciated with time increasing your wealth. The equity of the home can be used as collateral to obtain further financing in case you want to venture in the real estate industry as an investor. Securing a credit using the equity of the home also helps in obtaining a loan that attracts low-interest charges and thus it will help you in saving costs significantly.

At one point in life, you will find yourself harboring the idea of owning a home. You thought of having a place to call your own can be emotional but it's gratifying having to transition from a renter to a homeowner. It is a deal that you can't resist. However, a question that lingers in your mind is the thought of when that is going to happen given the financial complexity regarding the ownership of a home. Moreover, the whole process is also tricky and it requires careful planning and strategy. But there comes a time when you have got to make the decision.

To answer the question, I'd simply say that there is never a wrong time as long as you can afford the home. What you should instead think about is the type of home that you should own. This is what will guide you in determining the when to invest in a home. You must also think about the location where you'd love to own the home and think of the suitability of the place. Is it a region that you'd love to watch your kids grow? Does the region have good road network and the social amenities that advance your modern lifestyle? These are the examples that you should seek to answer. In essence, they determine the sweetness of the homeownership process.

However, even if all the conditions are optimal, you need to consider evaluating your financial position to determine if you are really capable of affording the home. You need to establish that at the long run, homeownership will have a positive finance implication as compared to renting. Some of the factors that you need to pay attention to include:

Total costs of purchasing the home

Like we have said, owning a home has a significant financial complexity. The costs involved are so huge and you have to clearly determine if you will eventually be able to afford the costs. You will need to determine the initial down payment that you are supposed to pays and the total repayments that you will have to pay if you secure credit financing from a credit institution. Moreover, you still have to include any other costs that may be involved such as legal fees and solicitors fees.

Debt implication

You have to determine if you are capable of servicing the debt. The implication of the debt will be measured by your current income. Therefore the income should be sufficient energy to services the debt while leaving you with a substantial amount to cater for your expenses. Importantly, the income should be stable and regular. Most lenders will shy away from extending finance to you if your income is unstable as well if they realize that the income is too low to service a debt.

The property market of your region

Real estate market is cyclical in nature and it is also affected by the location. There are instances when you may realize that renting is much better than owning a home when you evaluate the market. You need to evaluate how the market was performing a few years ago and also forecast how the market will be in the next few years to come.

Personal mobility

You need to ascertain the nature of your job and its impact on your mobility. Generally, in today's world, it is rare for a person to stick in one job and in one location for more than 5 years unless the person is engaged in personal business activities. Homeownership requires a person whose mobility is rather restricted. Therefore, if there are chances that after a few years you will have moved to another location, you'd rather rent a house as opposed to purchasing one. This could be the reason why most people purchase homes when they mature to their retirement age.

Making the decision to purchase a home

If you realize that owning a home has more benefits that supersede renting, you need to make the decisions to buy the home. Foremost, you need to establish an estimation of the costs of the purchase and other fees that may be involved. With the costs in mind, you have to sit down and carry out further analysis to determine the feasibility of purchasing the home. There are a number of considerations that you need to evaluate. They include;

Calculate you total current rents

The first step is to calculate all the debts that you are currently servicing and also the duration that you are supposed to service them. The debts may include students loan, car loan etc. You need to establish the impact of the debts on your income and determine the percentage of income they debts take. If the debts consume a higher percentage, you might need to rethink about soliciting more debts because this would increase the costs of the debts that you are servicing and hence starting your income and your personal budget. You'd rather postpone your homeownership project until you have reduced the burden of your current debts.

Consider you present financial position

You need to determine the amount of savings that you currently have in your bank. Essentially, you will need to pay a down payment of at least 20% for you to access a mortgage. Additionally, you will also need some cash for the transactions involved in the purchase of the home and you will also need to reserve some savings to cater for emergencies.

It is essential that you are able to pay a substantial amount of down payment. The higher the amount you pay for the initial deposit, the lower the interest rates applied to the credit. Therefore it is important to pay a substantial amount.

Forecast your future income

You will also need to determine your future income and anticipate growth if any. It is essential for you to be able to ensure that you will have a stable income for a few easy. You will also have to factor in the growth of other expenses such as having kids, advancing in education etc. These expenses will reduce your income.  You need to determine if you might be in a position to make the repayments without straining

Determine if you qualify for a loan

You will also have to evaluate of you qualify for a mortgage and the total amount that lenders are willing to extend to you. This might be affected by your previous repayment patterns and your current credit score as well as the current debts that you are financing.

If you find out that you are qualifying, you need to request for a preapproved letter which you will show to home seller and realtors to enable them to know that you are serious.  This can help you get a better deal.

Preparing to become a homeowner

If you find yourself ready to purchase a home, you need to prepare yourself top become a homeowner. You need to understand the basics of the whole process of purchasing the home and the transactions involved through the entire process. This will help you to be at a position of ensuring that you will locate a suitable home that will perfectly suit your needs and satisfy your expectations. What you need to understand include:
Venture into the property market you will have to take the bold move of immersing yourself into the market. You will have to be bold so that you can have the feel of how the market operates and the best approaches used in the market. At this stage, you objectives are to familiarize yourself with the different types of home available and their prices. Additionally, you also want to know how a type of home influences the prices as well as find out which homes are more suitable for you and their corresponding market values.

Determine the affordability

When checking the various homes on open days or those listed in property marketplaces, you should think about their affordability by factoring in the amount of money that you can afford to pay for the home. The cheaper the better, however, do not opt for a low-quality home. You need to evaluate the standards of the home and determine which is more affordable.

Get a feel of the purchase process

After you have found some affordable homes that may be suitable for you, you will have to familiarize yourself with the entire process of purchasing the home. You will need to know the requirements of each process, the costs involved and the participants. You will have to families yourself with the activi9tes that pertain to every specific transaction. You should also familiarize yourself with any documents involved as well as the approach and strategy used in executing the activities of every transaction. You need to know the roles of every person involved in each transaction and how they facilitate the purchase and sale of the property.

Conducts a research

You will have to conduct your own research to ascertain the market value and prices of the property of interest. You need to establish the size of the demand as well as the supply of the home available. You should also ascertain the impact of the economic status of the region to the market value of the property. Lastly, you must also try to forecast the growth of the home equity and determine its anticipated strength in the next coming years as compared to how it was a few years ago typically 5 years.

Prepare to strike when an opportunity arises

While carrying out your research, you also need to liaise with credit institutions about the possibility of obtaining a credit to finance the purchase. When doing so, you should be prepared to strike when an opportunity arises. This means that you should have you real estate team ready and the financing available. You'd consider obtaining a preapproved letter from the credit institution to guarantee the seller that money for the payment is underway.

Determining the quality of the credit financing

However, before you secure the financing, it is important for you to determine its suitability and determine if it is the right choice. Reason being that today interest rates are variable and they will be different from one lender to the other. Moreover, the interest rates of a single lender will also vary from one credit financing to the other depending on the features that the credit possesses.

Therefore you need to critically analyze the loan that you need and compare the interest rates charges among various lending institutions available. Below are some considerations that you need to analyze

Type of repayment

Today, there are some credit financing that will allow you to only pay the interest on the principal sum advanced. They are usually called interest-only loans. Although these reduce the financial burden of your income, this repayment type will take considerably longer to repay the loans. Additionally, most lenders will charge higher interest rates on the credit hence making the total costs of the credit to rise significantly.

If you are looking forward to reducing the total costs of the loans and hence be able to save some money, you need to consider the principal and interest repayment option. However, you may realize that the total amount that you will repay each month is relatively higher than the former repayment type.

Determine of you have acquired the right loan

Loans can vary and have various features. You need to determine of you have acquired the right loans. Also, you must evaluate the regulations enforced on certain loans and the implications of the regulation. Generally, you will find that most mortgage loans are attractive and attract low-interest rates. However, it is worth noting that the same loans may be stricter to acquire and are subject to changes due to prevailing market conditions.

Determine the impact of the down payment on the interest rates

Lenders are naturally conservative and hence they will vary the interest rates discounts on a loan depending on the overall equity of the home as well as the amount of initial deposit that you will make. Therefore it is necessary to make a substantial down payment which will help you reduce the burden of the loan repayments by obtaining a credit that attracts low-interest charges.

Hire a mortgage advisor

You may need to hire a mortgage advisor to help you in securing the loans and also accessing a credit facility which offers huge interest rates discounts. The mortgage advisors should help in hastening the processing of the loan and should help you in determining the best credit that you should apply.
Moreover the professional will help you in the management of the loans and also in monitoring the loans and your repayments to ensure that you minimize cost and also avoid paying more than is necessary. The expert is also important in helping you come up with better ways of servicing the loans.

Conclusion

to ensure that you purchase the right property, you need to exercise due diligence and caution when location the property. You need to conduct thorough investigations into the property to ensure that it meets the standards. It is important to hire the services of professional inspector or any person who will help out in exercising due diligence. It is advisable for you to be able to hire any professional who will be needed and who will add value to the purchase of the home. Determine the roles of each person in a real estate team and establish if the person will have a positive impact on your purchase. Hiring professional people to help you in making the purchase is essential to ensure that you do not falter when acquiring a property. Real estate experts are also responsible for ensuring that you benefit from the deal by acquiring a high-quality home.

Engel & Völkers

Hong Kong, Real Estate Agency
Shop A, Ground Floor, 95 Caine Road, Mid Levels
- Hong Kong
Company License: C-035745
Phone
+852 2561 3616

To the shop


Offer A Property

 
Yes, I would like to have my property valued by Engel & Völkers free of charge and with no obligation.

Array
(
    [EUNDV] => Array
        (
            [67d842e2b887a402186a2820b1713d693dd854a5_csrf_offer-form] => MTM5MjE5NzU3NkJ4d29xancwTDVhZWFIRzEycXAxcW9SdElHdVBqMTdV
            [67d842e2b887a402186a2820b1713d693dd854a5_csrf_contact-form] => MTM5MjE5NzU3NnlHcUR0Y2VlTXVPUndLMHZkMW9zMnRmRlgxaUcwaFVG
        )

)