Wisdom from the newbies

VIDEO: Buying your first home?

NEXT to signing on the dotted line of a marriage certificate, one of the biggest commitments in life is inking a Sale and Purchase Agreement. It requires us to lay out our life savings and, for most of us, procure almost a life-long debt. Though the groundwork involved may not be as extensive as tying the nuptial knot, it would be wise to make informed decisions.

Some of the best knowledge could be gleaned from real-life experiences of other homebuyers. TheEdgeProperty.com spoke to two new homebuyers who shared these four important lessons.

1. Keep track of your income documents

Nick Goh, who purchased a condominium unit last year with his wife, almost lost the opportunity to buy his preferred unit when his loan was rejected due to an irregularity found in his Employees’ Provident Fund (EPF) statements and pay slips.

“My first loan application was rejected not because of my financial situation but because the amount of employer contribution to EPF stated in the EPF statement did not tally with the amount stated on my salary slip,” the 38-year-old bemoans.

The loan rejection resulted in the forfeiture of their preferred unit. It took them another month to apply for a mortgage with another bank, by when they had to take another more expensive unit at a higher floor of the same project.

“I was upset and angry with my company’s recklessness, but if I had kept track of the payment details and had been ready with complete documentation, we would have been able to secure our first choice unit which was at a lower price,” he says.

Salary slips and EPF statements are two of the most important documents in mortgage applications.

2. Check your asset list

John Mah and his girlfriend are not impulse buyers. They had begun researching for information and ticked off several checklists for about one-and-a-half years before putting their money down for their desired property.

Subsequently, they found a new project being developed in Bukit Rahman Putra, Sungai Buloh, which met all their requirements and budget.

However, their loan application was rejected when the bank discovered that Mah actually owned another property in Kuala Lumpur. This, according to the bank, means his income would be insufficient to support a second property.

“Both of us were shocked when told that I owned another property as we were not aware of it, but soon we found out that my parents had bought a property under my name 12 years ago,” he recounts.

The first apartment that Mah’s parents had bought is being rented out and he does not need to take care of the monthly instalments, but he soon encountered another hurdle to purchase his own home.

3. Maintain a healthy credit profile

While a good repayment record certainly helps in getting a loan approved, a non-existent credit history may not bode well.

“I’m working in my family business and I do not use any credit cards. So there is no way for the banks to keep track of my credit history. Thus, my loan applications were rejected,” Mah discloses.

“Not having a credit card has not been a problem for me until my girlfriend and I applied for a mortgage,” he adds.

In the end, Mah had no choice but to let his girlfriend apply for the loan under her name. “Fortunately, she managed to get the loan and we finally bought our first home.”

Mah urges homebuyers to conscientiously maintain a healthy credit profile and to have realistic expectations. “Nowadays, it will be very difficult to gain a bank’s trust if you do not own any credit card because the banks would consider you a high-risk borrower.”

On building a good credit profile, Mah says: “It takes longer than you expect because according to a banker, it takes two to three years.”

4. Get your bullets ready

Meanwhile, Goh advises hopeful homebuyers to get at least RM5,000 cash in hand ready which they can place as a booking fee immediately when the opportunity arises.

“The booking fees vary, depending on the price of the unit you are looking for but usually RM5,000 would suffice. Before I bought my condominium in Shah Alam, I had lost three opportunities to buy in other projects as other buyers had placed their bookings before me,” he says.

So do your homework and get the cheque book ready for the booking fee and not lose that ideal property to someone else.

A good time to buy

So are you ready to shop for a property now? Mah notes that now is a good time to shop for good properties as it is a buyers’ market. “From my point of view, the best time to purchase a house is the next one or two years because developers are desperate to clear their stockpile. So if you want to reap the benefit, you should start looking for one now,” he concludes.

This story first appeared in TheEdgeProperty.com pullout on Jan 6, 2017, which comes with The Edge Financial Daily every Friday. Download TheEdgeProperty.com pullout here for free.