When buying your first home, you’re often bombarded with opinions from friends and family who’ve done it before. They’ve added small amounts to your knowledge base, but we find our clients are often left with a wide range of questions and not nearly enough context to confidently approach the home-buying process. We’ve put together an in-depth guide to help you understand exactly what you need to do, and when you need to do it.
Step 1: Make a plan & assess your options
The best place to start is by filling out your iRefi Mortgage Profile. This will give you access to advanced mortgage calculators, and an indication of what you’re able to afford.
You can also book a free consultation with an iRefi Mortgage Adviser, who’ll help you run through your goals, formulate a plan, discuss any challenges you foresee, and let you know which bank is currently the most competitive. They’ll also help you decide on the right time to be taking action, and follow up with you accordingly.
Step 2: Start researching the market
The best place to start researching the market would be trademe.co.nz or realestate.co.nz. It may also pay to touch base with two to three local agents to get their advice on where to start and what to expect from the area you’re looking to purchase in.
It’s best to understand your budget before wasting time and effort going to open homes and looking at properties that are unaffordable, and outside your price range.
Step 3: Apply for a pre-approval
Once you’re confident in the area you’re looking to purchase and that you’re within 2-3 months of a purchase, you should apply for a pre-approval. You can do this through iRefi Mortgages software by pressing the “Apply now” button. You don’t need to have an exact property in-mind before you get an approval. Working with our advisers will help minimize the risk you end up buying a lemon or overpaying for a property.
Step 4: Make a conditional offer
When you’re comfortable you have found the property you’d like to put an offer on, you should make a conditional offer. It’s important this is below your expected budget and gives you room to negotiate. If you aren’t confident with the negotiation process, one of our advisers will definitely be willing to give you the pep talk you need.
A conditional offer lets the vendor (seller) know you’re serious about buying a property, but that you’d like to make sure you can agree on a price before undertaking expensive due diligence, such as a builders report, checking the title documentation, and confirming your finance options.
Step 5: Negotiate the purchase price
It’s unlikely your first offer will be accepted, so go back and forth until you and the vendor can agree on a price. When you’re both comfortable, the Real Estate Agent and your solicitor will assist you in getting a conditional sale and purchase agreement signed by both parties. There are likely to be a few conditions, which will give you the option of forfeiting on the agreement if you’re unhappy with anything you find when you undertake the bulk of your due diligence.
Step 6: Undertake due diligence on the property
You’ll usually want to negotiate for 7-10 working days to complete your due diligence. The following points are good to check before going unconditional with the bank:
- The building is structurally sound
- The building is not contaminated by meth
- The property is acceptable as security to the bank
- The bank has confirmed all of your finance conditions have been met
- The property has a clear title document (LIM) that has been checked by your solicitor
If you find out something unexpected, it doesn’t necessarily mean you should back out of the deal, it may give you further leverage to go back and reduce the price if you’re still comfortable to proceed with the purchase.
Step 7: Confirm your unconditional offer & pay your deposit
Once you’ve signed an unconditional offer, the Real Estate Agent will ask you to pay your deposit, which will be held either by the Agent or the Solicitor until the agent passes over the balance to the Vendor.
If you’re going to Auction:
Generally in an Auction situation you’ll need to get all of your due diligence out of the way before the auction, as you will be required to pay your deposit within 48 hours of the end of the auction.
Step 8: Decide on your mortgage structure
It’s likely you’ll have a month or so between paying your deposit and settling on the purchase. In this time, you’re best to book a time to work through your loan structure with your iRefi Mortgage Adviser. They will negotiate you below market interest rates, and make sure the structure you choose will get you closer toward achieving financial freedom.
Step 9: Before settlement
You will need to send confirmation to your solicitor that your property is insured. Your Solicitor will guide you through this process and confirm with you the bank’s required insurance amount.
You will also need to make sure you’ve paid your solicitor the balance of the cash you are contributing toward the deposit. Whether that’s through your personal savings, your Kiwisaver, homestart grant, or being gifted from a family member.
Step 10: On Settlement Day
The solicitor’s job is to make sure the property purchase is executed and protects all parties involved. Generally they will have your outstanding deposit amount ready to be paid to the vendor’s lawyer, along with the full loan amount the bank will unlock on settlement day. When the solicitor transfers the property from the vendor’s name to your name, the bank will take security of the property and transfer the loan amount to your solicitor. Your solicitor will then transfer these funds to the vendor’s solicitor, completing the sale and purchase transaction.
Well done. You’re now a happy home-owner with awesome mortgage rates and a killer loan structure. Let’s start getting ready for the next one!