First-time homebuyers are prone to missteps when buying a house. Here are some of the common mistakes and how you can avoid them.

Every year, many first-time home buyers enter the market and hunt for their first house.

And these young and green home buyers are prone to making the same mistakes that their parents, sibling and friends made when they bought their first house.

So, today we are going to list down the five most common first-time homebuyer mistakes.

1. Not Figuring Out How Much House You Can Afford

Without knowing how much house you can afford, you might waste your time or could end up researching or viewing the home that you can’t afford yet.

Ideally, a first-time house buyer is to buy a house and get a home loan with a comfortable monthly repayment that will not keep them stressed out.

Sometimes, it is a good thing to aim low for the house.

How to avoid this mistake:

Start by talking to an experienced banker, a mortgage consultant or a financial consultant to help you calculate your loan eligibility and explore the affordable price range for your property.

2. Not Checking Credit Reports And Correcting Errors

The banks will explore your credit report before giving out any loans. You need to pay attention to the two most crucial credit reports: CCRIS Report and the second CTOS Report.

CCRIS (Central Credit Reference Information System) Report is a system that collects credit information on borrowers from participating in financial institutions and supplies the data back to them.

This is one of the sources of information used by participating financial institutions to establish a view of potential or current borrowers’ credit histories.

In other words, all your existing debts and loan will appear here for the Bank to review.

That includes the loan amount, latest 12 months conduct, outstanding loans, special attention accounts, approved and rejected application during the last few months.

You must have satisfactory conduct on all the loans and no other negative remarks on it.

However, sometimes the CCRIS report does have some errors.

Therefore, it is best to get the report ahead and fix the error before the Bank get its hands on it.

Sometimes the fixing can take a few weeks to months. So, you don’t want to be caught in a tricky situation.

CTOS (Credit Tip-off Service) report is also widely used by financial institutions to determine an applicant’s creditworthiness aside from CCRIS.

The credit-related information included in the credit report from CTOS consists of bankruptcy, legal action, and even case statuses.

It will also detail an individual’s business exposure, business ownerships and directorships if any.

How to avoid this mistake:

You can print CCRIS and CTOS report by download CTOS apps. There might be a minimal fee of around RM25-28 per report.

Once receive the report, show it to your trusted mortgage or financial consultant. They will help you to interpret the information and might be able to advise on how to fix it if there is an error.

However, if you show it to a banker, it might be tricky. Some bankers might not teach you how to fix it as it seems to go against the bank transparency policy on the application.

3. Making A Down Payment Before Negotiating With Seller

If you buy a second-hand house from a Seller or Agent, it is crucial to negotiate upfront your expectation.

If the house comes with certain fixtures and fitting, such as aircon, kitchen cabinet, built-in wardrobe or even a request to fix the leaking house, it should be agreed and stated in the Offer To Purchase before paying the down payment.

When you decide to buy a property, the property agent will prepare what is known as Offer To Purchase.

An offer to purchase is a letter or contract given by the property agent to a Purchaser. A Purchaser and Seller will require to sign the Offer To Purchase (OTP).

The property agent will forward the OTP to the Purchaser after the Purchaser paid a 3.18% deposit.

Rarely a Seller wants to entertain further request once the Purchaser made the deposit. Therefore, it is best to agreed upfront before the monetary exchange.

How to avoid this mistake:

List down all the requests on a piece of paper and forward them to the property agent or Seller.

The property agent or Seller will try to discuss and negotiate with you.

Once the terms are agreed, print down the final agreeable terms and get the property agent and Seller to sign them.

This letter should be an attachment to the Offer To Purchase, where the SPA lawyer will include it in the Sale and Purchase Agreement.

4. Not Taking Advantage Of First-time Home Buyer Programs

In the last few years, the government took lots of measures to ensure the first-time house buyer has advantages in buying their first house.

Many government projects cover that, for example, PRIMA, Rumah Mampu Milik Wilayah Persekutuan (RUMAWIP), Home Ownership Campaign (HOC), and many more.

Besides, if you are not keen on buying the above project, you can buy a second-hand house with a 100% financing loan by participating in financial institutions like Maybank, RHB, CIMB, BSN, etc.

And don’t forget the Property and Loan Stamp duty exemption for a first-time house buyer where you can save up to RM11,500!

How to avoid this mistake:

I. Before buying a second-hand house, you should take advantage of visiting under construction or almost completed project under PRIMA, RUMAWIP or even under HOC project.

II. Normally, the project under PRIMA and RUMWIP are selling houses at a lower price. On the other hand, a project under HOC will have lots of rebate on it.

III. Before putting the house down payment, you can check the loan eligibility and profile with the banks that provide 100% financing, or you can come to us, and we will steer to the right banks.

IV. For the stamp duty exemption, make sure your SPA and Loan lawyer apply for the exemption. Please do not assume they know what to do, or you might regret it!

5. Put In Your Home Loan Application With One Bank

It’s more fun to look at homes than to talk about your finances with the Bank.

Naturally, that’s what many first-time homebuyers do; they view a few houses but don’t apply for a home loan with more banks.

It is a big mistake that will cost them dearly.

Sometimes, this mistake is because of their loyalty to a specific Bank or because their parents tell them to apply with only one Bank or maybe the home loan application was controlled by the property agent. And most of them have high confidence in the home loan approval.

Sadly, none of the people they took advise from having enough experience or is up to date in bank policies and guidelines.

Let be honest; bank policy constantly changes from time to time. And you have to be in the industry to keep up with the changes.

Maybe five years ago, Bank B can approve Purchaser A loan. It doesn’t mean five years later; the same Bank can approve the same loan again.

People like us, Mortgage Consultant; it is our job to know this. We deal with bankers daily, so most of the time, we know about the changes.

The reason for applying to more banks is you have more options to choose from, and secondly, because of the limited time a Purchaser has to execute the SPA.

Everyone love to have more option to choose, with this you can compare for the cheaper and more suitable home loan package.

Secondly, the time frame to sign SPA is minimal, and some have 14 days from the Offer of Purchase to sign SPA.

For instance, if Purchaser A is applying for a home loan from bank B.

Typically, the approval time frame is about seven working days or more upon receiving full documents.

If the documents are incomplete, there will be more delay and believe me; you will not have enough time.

And imagine this, after 8-9 days of waiting, the result is Rejection!

What are you going to do about this?

Most people will apply for a new home loan with a second bank. And at this time, you only have 5-6 days left before the due date to sign SPA.

Don’t forget your SPA lawyer will need more time to do the land search, drafting and other works.

And of course, you don’t want to appoint any lawyer to start work before loan approval because if the loan doesn’t approve, the transaction might cancel.

If you have started asking a lawyer to open a file, you might need to pay a small fee if the transaction cancels.

In addition to the pressure to get your home loan approval, you will have to deal with the chasing and pressuring from the Property agent or Seller to sign the SPA.

Besides, according to the Offer to Purchase, a seller can forfeit the deposit if the SPA hasn’t executed within 14 days or 21 days ( depend on the negotiation you obtain from the property agent).

The Purchaser simply can avoid these troubles by merely apply from more banks.

How to avoid this mistake:

Once receive the Offer to Purchase and Seller’s SPA or title copy, start to apply with 3-5 banks simultaneously.

The Purchaser will benefit more as now he has more options to choose from and don’t need to worry about the SPA execution time frame.

Remember, as long as you have one home loan approval; you can start instructing the SPA lawyer to start the work.

You can take times in choosing the Bank and sign with one Bank.

That concludes our article today – 5 FIRST-TIME HOME BUYER MISTAKES AND HOW TO AVOID THEM.

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