Buying your first home is an exciting milestone, but it can also be daunting, especially for millennials facing a changing housing market and economic landscape. To help you navigate the process and avoid common pitfalls, we’ve updated this article with the latest insights and tips for millennial homebuyers.
Underestimating Costs
One of the biggest mistakes first-time homebuyers make is underestimating the total cost of homeownership. It’s not just about the down payment and mortgage. You’ll also need to factor in closing costs, property taxes, homeowner’s insurance, maintenance, and potential repairs. With rising interest rates and property values, it’s crucial to have a realistic budget that accounts for all these expenses.
- Get an estimation of all the costs and fees from the respective authorities to factor into your budget. This includes things like the 10% down payment, legal fees, stamp duty, and even future renovation costs.
- Consult a professional real estate agent who can help you estimate the average costs of technical, legal, or home services.
Ignoring HomeBuyers Programs
Many government programs are available to assist first-time homebuyers, offering down payment assistance, tax credits, and other incentives. There are multiple government programs for first-time homebuyers, such as stamp duty exemption until 2025, PR1MA’s rent-to-own programme, Residensi Wilayah (RUMAWIP) and Skim Rumah Pertamaku (SRP). It’s not too late to leverage on these government initiatives and get yourself a deal while buying a house.. Do your research and explore these options to see if you qualify for any financial assistance.
- Stamp duty exemption until 2025: This program exempts first-time homebuyers from paying stamp duty on properties below RM500,000, potentially saving thousands of ringgits.
- Rent-to-own program: This program allows eligible first-time homebuyers to rent a property with the option to purchase it later, making homeownership more accessible.
Not Getting Pre-Approved for a Mortgage
Pre-approval for a mortgage is essential before you start house hunting. It gives you a clear understanding of your borrowing power and puts you in a stronger negotiating position with sellers. In today’s competitive market, getting pre-approved can make your offer stand out from the crowd.
Benefits of pre-approval:
- Know your borrowing power: Getting pre-approved gives you a clear understanding of the maximum loan amount you qualify for, allowing you to focus on houses within your realistic budget.
- Stronger negotiating position: Pre-approval shows sellers you’re a serious buyer with financing already secured, leading to potentially more favorable negotiation terms.
- Faster closing process: Having pre-approval streamlines the mortgage application process, potentially shortening the time it takes to close on your house.
How to get pre-approved:
- Shop around different lenders: Compare interest rates and terms from various banks and mortgage brokers to find the best deal.
- Gather necessary documents: Provide lenders with income verification, tax returns, bank statements, and other financial documents for assessment.
- Submit a mortgage application: Complete the application with accurate information and answer any lender questions promptly.
Additional tips:
- Consider getting pre-approved early in your home search: This gives you more flexibility and negotiation power.
- Don’t make major financial decisions after pre-approval: Avoid taking on new debt or significantly changing your finances as it could affect your approval.
- Stay updated with your lender: Communicate any changes in your financial situation to ensure your pre-approval remains valid.
By getting pre-approved, you’ll be a more informed and empowered buyer in the competitive housing market. It’s a crucial step in navigating the complexities of the mortgage process and smoothly transitioning towards your dream home.
Rushing the Process
Buying a home is a significant investment, so it’s important to take your time and make informed decisions. Don’t rush into the process just because you feel pressure to buy. Carefully consider your needs, wants, and budget before making an offer.
Why it’s important to avoid rushing:
- Making hasty decisions: A rushed buying process can lead to you overlooking important details about a property, potentially resulting in problems down the line.
- Missing out on better options: Taking your time allows you to explore more properties and neighborhoods, increasing your chances of finding the perfect home that meets your long-term needs.
- Overpaying for a house: Rushing can lead to accepting unfavorable terms or concessions out of fear of losing the “perfect” house.
Tips for taking your time and avoiding rushing:
- Set realistic timelines: Create a timeframe for your house search that allows for thorough research and viewings.
- Don’t get pressured by emotions: Be mindful of FOMO (fear of missing out) and avoid making impulse decisions based on limited information.
- Seek advice from professionals: Consult with a real estate agent who can help you navigate the market and ensure a smooth process.
- Prioritize your needs and wants: Clearly define what’s essential in your ideal home and stick to your list to avoid settling for something that doesn’t meet your requirements.
- Be prepared to walk away: If a property raises red flags or negotiations are unsatisfactory, don’t be afraid to walk away and continue your search.
Remember, buying a home is a significant investment and a long-term commitment. Taking your time and making informed decisions is crucial for your financial well-being and future happiness.
Going Solo
Buying a home can be complex, so don’t be afraid to seek help from professionals. A qualified real estate agent can guide you through the process, negotiate on your behalf, and help you find the right home. Additionally, consulting a financial advisor can ensure you’re making sound financial decisions throughout the process.
Why seeking help is crucial:
- Navigating complexities: The home buying process involves legal, financial, and technical aspects, requiring expertise beyond just finding a house. Professionals can navigate complex paperwork, negotiations, and potential pitfalls.
- Market knowledge: Real estate agents have extensive knowledge of local markets, trends, and property values, helping you find the right property at the right price.
- Negotiation skills: Experienced agents can negotiate on your behalf to secure favorable terms and concessions, potentially saving you money and protecting your interests.
- Emotional support: Buying a home can be stressful, and having a professional to guide you through the process can offer valuable support and peace of mind.
Who to seek help from:
- Real estate agent: Choose a licensed and experienced agent familiar with your desired area and budget. They can guide you through viewings, offer expert advice, and handle negotiations.
- Mortgage broker: A broker can compare rates and terms from various lenders, helping you find the most competitive mortgage option.
- Financial advisor: An advisor can assess your financial situation and recommend strategies to ensure your home purchase doesn’t jeopardize your long-term financial goals.
- Lawyer: Consult a lawyer to review contracts, title deeds, and other legal documents to ensure everything is in order and protect your interests.
Additional tips:
- Get recommendations from friends, family, or colleagues: Ask for referrals from people who’ve had positive experiences with professionals in the field.
- Interview potential professionals: Ask questions about their experience, qualifications, and fees before making a decision.
- Be clear about your expectations: Communicate your needs and wants to your chosen professionals to ensure they can effectively assist you.
Remember, seeking help isn’t a sign of weakness, but rather a smart strategy to ensure a smooth and successful home buying journey.
Bonus Tip: Check Your Credit Score
Your credit score plays a crucial role in determining your mortgage interest rate. Make sure to check your credit score before applying for a loan and take steps to improve it if necessary. A good credit score can save you thousands of dollars over the life of your mortgage.
By avoiding these common mistakes and staying informed about the latest trends in the housing market, millennial first-time homebuyers can achieve their dream of homeownership. Remember, careful planning, thorough research, and professional guidance are key to a successful homebuying journey.
Here’s why checking your credit score is important:
- Lenders base loan decisions on your credit score: A higher score indicates you’re a low-risk borrower and qualifies you for better interest rates and loan terms. Conversely, a low score can lead to higher interest rates, smaller loan amounts, or even loan denial.
- It affects monthly payments: A one-point difference in your credit score can translate to significant changes in your monthly mortgage payment. Over the years, these differences can add up to a substantial amount of money.
- Helps uncover errors: Mistakes or outdated information can negatively impact your score. Checking your report allows you to identify and dispute any inaccuracies.
How to check your credit score:
- Obtain a free report: In Malaysia, you can access a free credit report once a year through CCRIS (Central Credit Reference Information System). You can register for online access at eCCRIS or visit AKPK offices nationwide.
- Credit reporting agencies: CTOS Data Systems and RAM Credit Information also offer credit reports and scores for a fee. These reports may provide additional information and insights compared to CCRIS.
- Banks and financial institutions: Some banks and financial institutions offer free credit score monitoring to their customers. Check with your bank or credit card issuer to see if they offer this service.
Tips for improving your credit score:
- Pay bills on time: Payment history is the most significant factor influencing your score. Make sure to pay all your bills, including credit cards, loans, and utilities, on time and in full.
- Reduce credit card debt: High credit card utilization can negatively impact your score. Aim to keep your credit card balances below 30% of your credit limit.
- Maintain a good mix of credit: Having a healthy mix of different credit types, such as credit cards and installment loans, can positively impact your score.
- Dispute errors: If you find any errors or inaccuracies in your credit report, make sure to dispute them with the credit reporting agency immediately.
By regularly checking your credit score and taking steps to improve it, you can secure the best possible mortgage terms and save money on your home purchase. Remember, a good credit score is an investment that benefits you not only when buying a home but also throughout your financial life.
The article is intended to be informative and helpful for prospective property investors in Malaysia, but it should not be considered a substitute for professional financial advice. For specific recommendations and guidance, it is always advisable to consult with a qualified mortgage broker or financial advisor.
